The owners of the prominent Kelowna condo towers, Water Street by the Park, are taking a handful of people to court who failed to cough up the money to complete their condo sales.

The developer behind Water Street by the Park, Amega Ltd and Orchard Park Properties, recently filed suits against five buyers who put deposits down in 2022 before the condos were built but failed to come up with the rest of the cash to buy their $630,000 units, now complete.

In those four years, everything has changed in real estate, from sales prices to interest rates to short term rental rules.

“They didn’t buy them as a rental because the numbers don’t really make sense… there was a lot of people that bought for speculation,” Kelowna realtor Mark Walker told iNFOnews.ca. “I had numerous people reach out to me that had never lived here, and they were in trouble.”

Walker said the calls he got were from people who couldn’t get mortgages to close their sales.

A guy from Toronto, who’d never set foot in Kelowna, heard it was a good market, but ended up borrowing money from a friend to close the sale.

“It’s like musical chairs, everybody made so much money in Ontario and even Vancouver… where you could just write a contract and you could get out of it… (and) sell it prior to possession,” Walker said. “But that completely stopped when interest rates started creeping up.”

The five buyers being sued by Water Street by the Park are all from the Lower Mainland.

It’s a problem well documented in the Toronto and Vancouver condo markets that’s now made an appearance in the Okanagan.

Court documents show the buyers put down roughly $130,000 for a deposit in early 2022, with a completed price of about $630,000. Fast forward four years, and interest rates have gone from 0.25% at the beginning of 2022 to 2.5%, while condo prices have declined.

As banks will only lend people up to the appraised amount, any shortfall is left to be covered by the buyer.

Kelowna mortgage broker Rachael Brew said she recently dealt with a pre-sale in an unnamed building that was appraised $100,000 below the contract value.

It meant the buyer had to find an extra $100,000 the bank wouldn’t lend them.

“I had to refinance the primary residence to pull equity,” she said. “It was the only way to make up that shortfall.”

Brew said it all worked out, but the buyer was hit with fees as they’d only just remortgaged.

She said she hasn’t come across anyone who has failed to complete a sale “yet” but Walker said her heard a recent story.

“The developer ended up reducing the price from her original purchase contract price to a new purchase contract price,” he said.

He wasn’t sure of the figures but thought the studio unit was reduced by about 20%.

Publicly available data shows that a 483-square-foot unit at the Anacapri sold in $405,000 in April 2023, and the same size unit is now listed for $319,000.

“(In) the last 18 months, we’ve seen a bigger drop than the prior two and a half years,” Walker said.

He recently had a client buy a condo in an unnamed building for $460,000, which the previous owners bought for $540,000 in 2022.

“That must have hurt,” he said. “It sucks, but that’s real estate.”

Numbers from the real estate analysis the Rennie Advance show that condo sales are third below the 10-year average. However, statistics show the price hasn’t really moved.

Walker said the statistics don’t match the reality on the ground.

“If you just track the sales… something sold to what it was bought for, you’re going to see a pretty sharp decline from 2022,” he said.

Real estate appraiser Lee Knull agreed.

“It’s fairly well known that that condo market for (Water Street by the Park) and then a couple … in the Lower Mission area by Gyro Beach… are seeing a substantial decline in value from 2022 until now,” he said.

Knull said there are far too many variables to give a percentage as to what the decline is, but he’s also seen it in older condo buildings.

It’s unknown how many people won’t be able to complete on their condo sales.

“I’ve never sold a speculation condo… I just don’t think it’s smart business,” Walker said. “You’re just gambling. You’re hoping something goes up and that’s not really safe.”