The Thompson-Okanagan's condo market experienced a significant slowdown in 2025, largely attributed to an oversupply of new rental units and the lingering effects of short-term rental regulation changes. This confluence of factors created a 'perfect storm,' leading to vacancy rates not seen in decades in areas like Kelowna.
Key Takeaways
- A surge in purpose-built rentals and investor scrambling to find long-term tenants pushed Kelowna's rental vacancy rate to 6.4% in 2025, up from 3.8% in 2024.
- While Kelowna faced an oversupply, other Southern Interior markets like Vernon and Kamloops maintained tight rental markets with a 1.7% vacancy rate.
- Housing affordability remains a significant challenge across most of British Columbia, with limited escape routes even in traditionally more affordable regions.
- The sales market is showing signs of a slow recovery, with modest growth anticipated for 2026.
A Divergent Market Landscape
Across British Columbia in 2025, a notable divergence occurred between major population centers and other regions. While Vancouver experienced one of its worst years in 25 years, markets like the Island and the Interior, including the Thompson-Okanagan, performed relatively better. However, sales in the Thompson-Okanagan remained below the 10-year average, though significantly stronger than the Lower Mainland.
The Impact of New Rentals and Regulations
Kelowna, in particular, saw a substantial influx of new purpose-built rental apartments. This, coupled with the ongoing repercussions of changes to short-term rental regulations, led to a sharp increase in the rental vacancy rate. Many investors who had purchased pre-sale condos with the intention of using them for short-term rentals or flipping them found themselves needing to secure long-term tenants as the resale market cooled.
"So, you’ve got all this new inventory hitting the market at the same time. It’s created a perfect storm, and we have vacancy rates we haven’t seen in decades," explained AJ Hazzi, founder of Vantage West Realty Ltd.
Regional Disparities
Despite the challenges in Kelowna, other areas within a short driving distance, such as Vernon and Kamloops, maintained a tight rental market with a vacancy rate of just 1.7%. This highlights the localized nature of the market dynamics within the Southern Interior.
Persistent Affordability Issues
For aspiring first-time homebuyers, the dream of affordable housing remains elusive across most of British Columbia. Even regions like the Kootenays, which have seen significant price increases in recent years, offer little respite. The north and Kootenays were noted as areas where affordability is particularly difficult.
Outlook for 2026
Looking ahead to 2026, there are indications of a potential recovery in the sales market. Hazzi predicts slow, incremental growth, suggesting that while the market is unlikely to experience a rapid boom, it should see a slight improvement compared to 2025, mirroring the modest gains seen from 2024 to 2025.
