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The value of single-family homes in the Okanagan skyrocketed in 2017, and one economist said the demand is being fuelled by investors.

Ross Hickey, assistant professor of economics at UBC Okanagan, said much of the upward pressure on prices comes from people looking to retire and people looking to buy recreational properties.

"That's a little bit different than what's driving the demand in the Vancouver market, but we're feeding off of that demand as well."

Updated home values put out by BC Assessment last week showed a year-over-year average increase of about 16 per cent in Kelowna and Penticton, and 11 per cent in Vernon.

"What's driving the assessments is the value of recent sales. BC Assessment uses a fiscal model that relies on new information about improvements to properties," Hickey said.

"But also if other houses on your street were sold for a higher price than they were previously assessed at, that's going to increase the assessed value — not only for the properties that are sold, but also for other properties in the neighbourhood that are comparable."

Hickey doesn't think the current rate of increases is sustainable, but he expects it to persist for a while longer, based on the current buying attraction for people from larger metropolitan areas like Vancouver and Calgary.

"This demand, it's not based on the fundamental liveability of the communities."

But in terms of a "bubble bursting" for real estate, Hickey said that likely wouldn't happen here on its own.

As he noted how people from larger areas are helping fuel the increased property values in the Okanagan, he said it would take a bubble bursting in one of those bigger areas for a trickle effect to occur.

"If we see a dramatic reduction in the value of properties in Vancouver, I suspect we'd see the Kelowna market's bubble burst pretty rapidly as well."

Hickey added while the increased property assessments may look alarming, he said it would sting more if those values went the other direction.

"Imagine if we saw a 17 per cent decrease in assessed values... People would be screaming like crazy. It cuts both ways."