The real estate industry says the British Columbia government’s springtime “cooling off period” legislation will arrive just when the market itself has cooled off. As pandemic concerns decrease, housing inventory is increasing, which means the legislation that was intended to take the heat out of the market and protect consumers will not just be ineffective but unnecessary, said Elton Ash, regional executive vice president for Re/Max Canada.
“I’m hearing from the membership that spring inventory levels are coming up. It’s like the hundredth monkey syndrome -- there is this telepathic thing that occurs, buyers reach a point -- and we saw this in Vancouver five years ago or maybe not even that long ago, where the Mainland Chinese were such a strong influence and then they just stopped because they reached a point. They said, ‘No, we’re not paying anything higher. This is it folks.’ And that’s what we are seeing with buyers generally across the country right now.”
An Unpopular Proposition
Last November, BC Finance Minister Selina Robinson announced new legislation to arrive this spring that would allow property purchasers a seven-day grace period to back out of offers on resale properties and newly-built homes. The legislation, still under review, was announced at the peak of the market, when buyers were entering into frenzied multiple offer situations, driven to make high offers and often without the usual condition of having an inspection.
READ: Don’t Look Now, But Offer Conditions Are Returning to the Market
The industry as a whole rejected the idea of a cooling off period, and on February 28, the BC Real Estate Association (BCREA) issued a 30-recommendation whitepaper in response. Its central recommendation is a five-day, no offer period, or pre-offer period alternative that would give buyers time to do pressure-free due diligence on a property.
The Unintended Consequences
The greatest concern with a cooling-off period is that it is subject to abuse, such as the buyer who makes a half-hearted offer while looking for a better deal and then ties up a listing for a week. That would impact the seller, because the golden rule of real estate is that those first 21 days are key in the marketing of a property, says Ash, who’s been in the business for 41 years and represents 3,500 agents.
This week Ash wrote an open letter to Robinson, expressing concern about a statement she made regarding his industry, and the overall lack of consultation. He also advocated for the BCREA recommendations.
“There is so much stress on buyers right now with lack of inventory and so you make an offer that isn’t really what you want, but it’s close enough. Then three days later, another house comes onto the market and off you go. From a seller’s perspective you are held up in your plans. And it’s dominos. Sellers become buyers, and they can’t do anything until the rescission period ends, and the deal goes totally firm and then you can go out and look. So you are slowing the market even moreso, which gives more stress on the market situation. I think that is an unintended consequence.”
Robinson then doubled down with a statement that said she understands a commission-driven industry has a vested interest in the market being hot, but the government’s role is to make sure people are protected. She said pre-offer periods wouldn’t likely address buyer risk. The province said the BC Financial Services Authority (BCFSA), newly appointed last August with the mandate of regulating real estate, is now consulting with the industry.
The exact date cooling-off periods would come into effect has not yet been announced. Ash said they’ve been dealing with “a blanket of silence.” If it is introduced, a majority of BCREA realtors surveyed want to see a penalty large enough to deter frivolous offers.
Ash also took issue with Robinson’s suggestion that his industry aims to keep prices high.
“Being accused as a realtor of having a vested interest in a super-heated market, I find that unfathomable. As I’m on the road this week on Vancouver Island talking to realtors, I see that they feel the stress just as the people they are working with feel it. The market in and of itself isn’t healthy.
“It’s politics,” he says of the legislation. That’s all that it is… for Minister Robinson to say realtors have a vested interest in an overheated market I think is ludicrous and immature. But finding solutions is long term. And the white paper that was given to government was far beyond just the offering situation.
“This is a complex problem, and it requires time and vision and more than a four-year outlook,” he added, referring to government’s four-year term.
He cited a lack of research that supports their decision, calling it “purely anecdotal.”
“Anecdotally, there are situations where buyers have felt pressured and made a decision.”
Returning Supply Starting to Balance Market
But now that buyers are less motivated to move out of the city, many markets will be stabilizing, and he said the signs are already happening.
Andrew Carros, license partner at Engel & Völkers Vancouver, said he has also seen inventory going up throughout Metro Vancouver. Meanwhile, sales are still strong.
“Inventory went up all over the region, and so far sales are up as well. So the market is still quite stable,” he said. “At this point, I’m not seeing any downward pressure on prices.”
It’s not yet a “buyer’s market,” but he said he is seeing buyer fatigue after a super hot two years. As well, increasing interest rates and the Ukraine conflict are affecting markets. And although there’s an uptick in inventory, it’s still low for the level of demand. He sent data that showed a 54% increase in new listings for detached houses from January to February, and a 63% increase in sales.
Industry Calls for Alternative Measures
The BCREA whitepaper also called for greater transparency around properties, making property disclosure statements mandatory when a property is listed, raising the entry qualification for new realtors, and transparency on the number of offers written.
The federal government is looking at tabling more legislation that will impact the industry, with a homebuyers’ bill of rights that would ban blind bidding. Buyers routinely make offers on properties without knowing the other offers, which means they often bid too high. A competitive atmosphere can escalate their fear of missing out, driving prices higher than necessary.
Ash said he prefers the idea of total transparency, which is the open auction. In Australia, realtors stand on the street taking bids from interested buyers and onlookers, or they hold auctions in hotel lobbies. Some experts say there is little price difference between blind or open bidding.
“There are ways to create transparency. You don’t have to criminalize it,” says Ash. “The most transparent is unreserved auction, which is the sale of first choice [in Australia]. In North America, auction is a sale of last resort and that’s a carry over from the Depression. But that, ultimately, is the most transparent way. I actually feel Canadians are close to seeing that as a sale of first choice potential, given market conditions remaining the way they are -- because that is a true indicator of true market value.”
