British Columbia Housing Market: What “Cooling Off” Legislation Could Mean

Have you seen the price of homes in Northern BC, Fraser Valley, Victoria and Vancouver lately? The British Columbia housing market has been one of the hottest housing sectors before and during the coronavirus pandemic, and once the COVID-19 public health crisis is in our rear-view mirror, this western province could maintain its juggernaut status moving forward. And it is not only Vancouver that’s contributing to the region’s meteoric gains and sizzling sales activity.

In January, the B.C. housing market continued to experience tight conditions, resulting in higher prices.

According to the British Columbia Real Estate Association (BCREA), residential property sales tumbled 14.7 per cent year-over-year to kick off 2022, totalling 6,138 units. But the average sale price in B.C. surged at an annualized rate of 23.5 per cent in January, to $1,042,169.

Price gains were seen across the province, from Chilliwack (+43.5% to $907,385) to Powell River (+29.9% to $600,868).

Although sales slowed due to a lack of supply, housing experts purport that activity was still strong compared to previous years. Total active listings fell to near record lows in January, totalling just 13,000 units. Industry observers say that a healthy figure would be closer to 40,000 listings, to put this number into context.

As a result, higher prices could continue to be the norm in the upcoming year, predicts BCREA Chief Economist Brendon Ogmundson.

“We expected home sales in 2022 to moderate from the frenetic pace of 2021,” said Ogmundson in a news release. “However, sales activity will remain high by historical standards.”

Because of the enormous rise in prices and the volatility in the sector, homebuyers are under tremendous pressure to get their feet in the door before valuations grow even higher, even if that means being cavalier and abandoning reasonable tactics to purchasing a home. The province is adding a layer of protection for households purchasing a house or condominium.

What “Cooling Off” Legislation Could Mean to the British Columbia Housing Market

This spring, the provincial government is expected to introduce so-called “cooling-off” legislation. The objective of this policy is to give homebuyers the opportunity to change their mind on the purchase of a residential property.

The Province proposed that prospective homebuyers be allowed to back out of their purchase agreement with little or no legal consequences in a recent statement. This is already instituted for pre-construction condominium sales.

The BC Financial Services Authority (BCFSA) said it would consult with industry experts, stakeholders, and other professionals to determine the proper consumer protection measures. This could also include assessing the blind bidding process and condition waiving in offers.

“People looking to buy a home need to know they are protected as they make one of the biggest financial decisions of their lives. Especially in periods of heightened activity in the housing market, it’s crucial that we have effective measures in place so that people have the peace of mind that they’ve made the right choices,” said Selina Robinson, Minister of Finance, in a statement. “With this step, we’re moving ahead to protect people and their interests in the real estate market by bringing in a cooling-off period for homebuyers and looking at additional measures to ensure effective safeguards are in place.”

Blair Morrison, CEO of BCFSA and superintendent of real estate, added that it is critical that the province ensures fair markets and promote public confidence in the B.C. real estate market.

“BCFSA’s goal is to ensure that British Columbians are protected when buying and selling homes – one of the most important financial transactions of their lives. Both buyers and sellers need to be supported and have time to make good financial decisions,” said Morrison.

Andy Yan, urban planner and adjunct professor at Simon Fraser University, told CBC News that this could trigger a “calming effort” in the B.C. real estate market. He added that it could encourage families to rely on home inspections and conduct the necessary research.

Public consultation is presently underway, and a final decision from the government could be imminent.

British Columbia Real Estate Industry Voices Concerns

Industry insiders have voiced concerns surrounding a cooling-off period as a way of reining in rising prices. The British Columbia Real Estate Association (BCREA) recently released a white paper called A Better Way Home: Strengthening Consumer Protection in Real Estate, which outlines alternatives to the proposed cooling-off period. Elton Ash, Executive Vice President of RE/MAX Canada, shared the BCREA’s concerns and supported their recommendations in a memo to Minister Robinson.

“I support thoughtfully designed, properly vetted and evidence-based policy that protects British Columbians and enhances professionalism and transparency in the real estate sector,” Ash wrote. For the “cooling off” period, as well as other policy interventions being considered to improve consumer protection, Ash recommend that the BC Government:

• Commit to undertaking fulsome consultation with real estate professionals and the public prior to announcements of any intention to implement policy.
• Ensure each proposed policy has a corresponding problem statement, objectives, goals and metrics to evaluate its effectiveness, making those available to the public.
• Provide public timeframes for monitoring and evaluating new policies.
• Ensure that any new rules are harmonized with existing rules and other regulatory requirements.
• Consider the specific impacts of potential policies on BC’s diverse regional markets, especially in rural, northern and remote communities.
• Ensure that a policy does not lead to an increase in unrepresented buyers or sellers.
• Consider the impacts of potential policies on commercial real estate.
• Consider the impacts to all parties in the transaction, balancing differing priorities and needs.
• Consider the impacts on a seller’s market compared to a buyer’s market.
• Ensure that measures don’t negatively impact affordability.
• Consider how these policies would interact with each other if multiple measures were adopted.
• Provide adequate notice for consumers and real estate professionals. Resources, education and adequate time to adjust practices and develop new standard forms for brokerages will help with compliance.
• Provide adequate information about data requested from brokerages, including its uses and how it would be reported to licensees, as well as the frequency and complexity of the reporting required by brokerages. This will ensure licensees understand what is expected of them, how they would benefit and how consumers would benefit.

“Market conditions throughout the course of the pandemic have highlighted the increasing difficulties faced by prospective homeowners in BC. A greater imbalance between supply and demand has resulted in heated market conditions,” Ash adds. “While the government should be looking at all options to ensure the public is best served, steps to increase housing supply should be at the top of this list.

The Biggest Buying Decision of Your Life

Whether this policy measure will impact the broader B.C. housing market remains to be seen.

In any market, purchasing a property is the most significant buying decision of your lifetime. However, these are not normal conditions, considering the average price to buy a home in the province is north of $1 million. This could leave buyers saddled with immense mortgage debt and payments, in addition to the wide variety of costs associated with home ownership.

The current environment is evidence that having a real estate agent guide you through the landscape is critical. From rock-bottom housing stocks to fierce competition throughout the region, a realtor is a resource to help ensure you are making the right moves. A real estate agent by your side can mean all the difference between winning and missing out in the home-buying process.

Sources:

• CBC
• BC Government
• BCREA
• BCREA