Efforts to cool the housing markets in both BC and Ontario are admirable when you look at them on an elemental level, but there is reason to be critical when those efforts are left in the hands of Provincial Governments that have proven themselves to be wholly incompetent. That is very much the case in British Columbia, as in addition to all the other preceding measures introduced by the Government to disadvantage hard working home owners we now have them with new proposed legislation slated to be introduced this spring.
What this ‘Cooling Off’ legislation will do is give homebuyers a window to back out of deal for a property with no or diminished legal consequences. Not only will this create very real problematic scenarios for people selling their home, but industry experts are saying it will do next to nothing to cool down the housing market, and particularly in the very overheated Lower Mainland. It is an effort to placate those who can’t afford to get into the housing market, but we suppose there is some value in that.
Indeed, getting into the real estate market is much more difficult than it used to be, and at the same time working in real estate is more challenging that ever too. It has become competitive in just the way you’d imagine it would with home value increases meaning more in earning capacity for realtors, and there are hundreds of thousands of realtors working across Canada. If generating new clients is a struggle then our online real estate lead generation system here at Real Estate Leads is highly recommended.
Back to topic – let’s look at why the BCREA is not in favour of the new legislation and their explanations as to how it will not affect the market positively much if at all.
Ineffectual at Best
The general consensus is based on similar cooling-off periods in other global jurisdictions that showed the policy to be ineffectual at best. Industry experts point to how chronically low inventory supply is the major stumbling block for this type of legislation having the type of effect intended for it. The lack of inventory will promote ever greater numbers of prospective homeowners willing to consider overextending themselves to buy a home, and this means greater numbers of them potentially backing out when reconsidering their purchase.
Again, in theory that is not a bad thing and there will be some buyers that will be saved from making a hasty purchase that would end up hating them down the road. But there are going to be far too many of them in that potential scenario unless there is more of a natural supply of inventory that allows for an inherent balance between interests of both home seller and the homebuyer.
The position of the Government is that there is a need to ensure ‘buyers have time to get the information they need to make a sound decision that is right for them’ according to Minister Robinson, who added further that the real estate industry’s commission-based nature means the BCREA has a vested interest in keeping the market hot. That is also likely true, but again the focus needs to be on the fact that similar efforts have failed in other markets around North America – and ones that have much less of a supply crisis and lack of new housing starts like Vancouver does, and to a lesser extent BC as a whole.
Bad Unintended Consequences
It is entirely fair to say that this hast the potential to put homeowners who in a difficult situation. Many homeowners who accept an offer on their home when they have plans to move to another one have a very real chain of events to consider. Having an accepted offer be unvalidated summarily has the potential to hurt them, especially if they themselves are putting in their own offer on a new home. Yes, that will not always apply but it will in many instances and this is something that needs to be considered.
This uncertainty for sellers who may be involved in another transaction is reason enough to say that this proposed legislation is poorly thought out, and that is to say nothing of other factors that will grow out of this:
- Worsening affordability
- Increase in frivolous offers as some buyers figure they can be loose with making offers knowing they won’t be held to them so long as they go back on them within the time period
Pressing Low Inventory Factor
It was just earlier this month that VREB pointed to a lack of supply causing January home sales to slow from a record-setting pace last year. The benchmark price still went up 18.5% as compared to last January, and that was to roughly $1.2 million for a detached home. Industry experts are also saying that BC is 25,000 listings short of the amount that would be required for a balanced market and that the lack of supply may be even more problematic with the 70,000 to 80,000 immigrants expected in BC this year.
As an alternative, the BCREA is very astutely suggesting a mandatory ‘pre-offer period’ where offers will be blocked from being made for at least 5 business days after the property is first put on the market. The idea there is that prospective buyers have enough time to do their research on a home and evaluate their ability to afford it without having to worry about offers being made and / or the home selling before they have a chance to do this due diligence.
The BCREA also suggests the province create more transparency in the homebuying process, so people can make more informed decisions when they find themselves in multiple-offer scenarios and are unsure if they want to continue bidding higher.
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