Mission Group's Aqua Waterfront Village project, in Kelowna, B.C. The project had been hit hard by a provincial ban on short-term rentals, but in April, the province announced that Kelowna would become the one jurisdiction exempt from short-term rental restrictions on investment condos.Mission Group
The nearly 4,400 empty, unsold, new condo units that are burdening Metro Vancouver’s development and real estate industries are only part of the picture.
Unsold new condo inventory is at a peak not seen since December, 1995, when 3,331 new units sat vacant. But empty, unsold, new duplexes and townhouses are also at a peak not seen since the 1990s, according to urban planner Andy Yan, director of Simon Fraser University’s City Program, who analyzed the last 36 years of Canada Mortgage and Housing Corporation market absorption survey data for Metro Vancouver.
From May, 2025, to May, 2026, new empty condos increased in number by 76 per cent. However, the number of unsold housing units of all types increased by 53 per cent within the last year, including duplexes, townhouses and a small number of detached houses. “We have seen a lot of attention on apartments and condos, but you see parallels in Metro Vancouver, particularly for row housing, such as townhouses and semi-detached, such as duplexes,” said Prof. Yan.
In the 1990s, interest rates soared and the economy was down, which explained the high numbers of unabsorbed new housing units. A big difference between the nineties and the current climate is that housing prices then were based on local incomes. In the past couple of decades, prices and incomes have decoupled, a condition that hasn’t changed despite the current unprecedented glut of new housing, said Prof. Yan. While 47 per cent of recently built condos in Metro Vancouver have been investor-owned, he believes that demand for attached housing types has decreased overall. It’s not just about a glut of condo supply.
Newcomers to Canada could feed a future market upswing, Statistics Canada data suggest
Long-time developer and author John D’Eathe has seen government policy impact housing markets over the decades.
“Capital was cautious then [in the nineties], the population growth was steady and predictable, and government policy appeared concerned that housing be provided for everyone. [For instance, there were] federal government tax breaks to build lower-rental housing, which I worked with a lot,” said Mr. D’Eathe. “In the last decades, we have allowed uncontrolled capital movement, feeding market-driven zoning. Of course, all building and housing development resources moved to the most profitable ventures, land values surged, the demand justified extra floors and the municipalities complied happily.”
New detached houses are mostly unaffected by the unsold and empty stock phenomenon because few have been built in comparison to multifamily and semi-attached housing units. Also, houses have become scarcer as they are replaced with higher-density housing, said Prof. Yan.
“While everybody is focused on apartments, we ought to look at what’s happening with row and semi-detached [units]. There are larger factors shaping this. I don’t think it’s just about supply. There’s an issue here about how demand has changed. Not just the scale, but the diversity of demand.
“Housing in Vancouver may not need a bailout from the government, but instead, a critical reconstructive surgery to reattach local incomes to housing costs.”
Developer sees a market for restored modernist homes like his own
Prof. Yan said unabsorbed new housing stock varies by region. Kelowna – which saw a massive 700-per-cent increase in unsold condos from October, 2025, to April, 2026, had a sudden drop in May. The number of empty unsold new condo units dropped from 616 in April to 571 in May in Kelowna.
Kelowna’s situation is perhaps a case study in how policy can impact demand. In April, the province announced that Kelowna would become the one jurisdiction exempt from short-term rental restrictions on investment condos. The city had zoning in place that allowed specific tourist-friendly subzones for short-term rental, but two years ago the province banned short-term renting of entire homes not lived in by the owners. The regulation hit hard in a city largely driven by tourism, said developer Jonathan Friesen, chief executive officer of Mission Group. The development company has a new three-tower project called Aqua Waterfront Village that has just completed the final phase. Because the project allows short-term rentals, the ban had a huge impact on existing owners of the first tower, as well as on presales for towers two and three. Families had purchased units to operate as short-term rental investments.
“When the rules changed to disallow short-term rentals there, we felt that it was a bit of a breach of trust, honestly, because investors – and I was personally one of them – had counted on being able to short-term rent these things if we wanted to, and were now unable to,” said Mr. Friesen. “The buyers simply followed the existing rules – and then the rules got pulled out from under them.
“The ripple-out effects of not having short-term rentals are pretty profound for all of Kelowna,” he added. “If you have a little restaurant or a retail shop, it’s going to be less likely that you’ll do well without the tourists in town. Because in the summertime, our town exists – actually, it thrives, because of tourism.”
Vancouver’s real estate market adjusts to the new normal
In response to the ban, many owners had put their units on the market in an attempt to sell. Mission Group also had an unsold unit on the market. The province had an “opt-out” clause for municipalities that saw vacancy rates go above 3 per cent for two years in a row. Kelowna’s vacancy rate reached 6.4 per cent last year due to a surge in housing supply, so the city lobbied for an exemption.
As soon as the rule change was announced, those listings disappeared, said Mr. Friesen. He said owners likely cancelled their listings because they could go back to short-term renting. Mission Group immediately sold the one unit they had remaining, which shows the demand for short-term rentals, he said.
“It sold over asking with multiple offers. So, that’s the difference it can make on specific properties where short-term rentals are now allowed,” he said of the policy change.
The recent exemption only applies to units already zoned for short-term rental, which is a relatively small number that will likely increase over time. Because many condo owners rented the units out long term after the ban, there are only about 400 short-term rental units on the market in Kelowna today, down from more than 2,000 units two years ago, said Mr. Friesen.
“If you look at the overall data for Kelowna, there hasn’t been a significant change in the MLS prices of condominiums since May. But in small pockets, for the buildings where it is allowed, the velocity is way up.”