The British Columbia Real Estate Association says a cooling-off period the province is looking to introduce will not take the edge off the market’s heated conditions.
The proposed legislation is slated to be introduced this spring and will give homebuyers a window to back out of deal for a property with no or diminished legal consequences.
But the association, which represents 24,000 B.C. realtors, said Monday that an analysis it conducted of similar cooling-off periods in other global jurisdictions has shown the policy to be “ineffectual at best.”
“While attractive at first blush, in a market characterized by low supply, such as ours, we believe that a cooling-off period will cause more problems than it solves,” said the association’s chief executive, Darlene Hyde, at a press conference.
“We are concerned that not enough attention was paid to the possible unintended consequences, such as the uncertainty for sellers who may be involved in another transaction, worsening affordability, an increase in frivolous offers, and numerous other factors.”
She added the cooling-off policy was proposed without ample industry and consumer consultation and called on the government to take a “less prescriptive approach.”
In an email to The Canadian Press, Finance Minister Selina Robinson said she’s still intent on pursuing cooling off legislation because she wants to ensure “buyers have time to get the information they need to make a sound decision that is right for them.”
She pointed out the real estate industry’s commission-based nature means the association has a vested interest in keeping the market hot.
Those remarks came as BCREA released a white paper containing 30 recommendations for addressing the bidding wars, supply scarcity and soaring prices Hyde feels created an “untenable situation.”
Earlier this month, the Real Estate Board of Greater Vancouver said a lack of supply caused January home sales to slow from a record-setting pace last year, nonetheless pushing the benchmark price up 18.5 per cent from last January, to about $1.2 million.
Hyde estimates the province is 25,000 listings short of what is needed for a balanced market and said the lack of supply may be further exacerbated by the 70,000 to 80,000 immigrants B.C. expects this year.
The association wants to see the province tackle these conditions by introducing a mandatory “pre-offer period” that will block offers from being made at least five business days after a property is first listed, so prospective buyers have enough time to research a home.
Anne Hermary, a real estate advisor with Royal LePage Westside, says the idea would be a “genius” way to address frenzied conditions.
“A lot of buyers are going in without all the information on the listing, frantically trying to put an offer in that’s competitive, and ultimately buying something unprepared,” she said.
But Robinson isn’t sold. “Pre-offer periods are unlikely to address concerns about the risk to buyers, can encourage multiple offer situations and have an unknown effect on housing prices,” she said.
BCREA also wants the province to bring more transparency to the homebuying process, so people can make more informed decisions, when they are caught in multiple offer scenarios.
BCREA envisions this working like Ontario’s Stronger Protection for Ontario Consumers Act, which prevents listing brokerages from indicating they have an offer unless they receive a form declaring an offer has been signed.
The act requires brokerages to keep copies of all written offers to the seller and counter offers, and allows buyers who made offers to request a regulator validate the number of offers presented.
BCREA likes these processes instead of restricting blind bidding, a process where prospective buyers don’t get to see details contained in competing bids for homes they make an offer on.
The federal government plans to ban blind bidding and B.C. is investigating the process too.
However, critics have doubts about whether it can alleviate supply constraints and high prices because of what they’ve seen in other markets.
BCREA, for example, points out that Sweden does not permit blind bidding, but has experienced even faster home price growth during the pandemic than Canada, and comparable home price growth over the previous 20 years.
New Zealand has not banned blind bidding, but uses open auctions, where all parties know each others offers, and has experienced the fastest-growing home prices in the world over the last 20 years, BCREA said.
The association also wants the province to give more information to people considering moving to strata housing, where people purchase a portion of a property rather than the entire building. More than 1.5 million British Columbians live in strata housing.
BCREA thinks documents — strata bylaws, depreciation reports, information on contingency reserve funds and copies of insurance paperwork — should be made available with listings.
While Hermary appreciates BCREA’s suggestions, she believes supply is the way forward.
“Until we really deal with the fact that we’re not building enough and we’re not really having a conversation around how to create more land…we’re not really able to find solutions that are going to work long-term.”