One of the unintended but likely consequences of a cooling off period is that buyers will make more bids, thereby inducing more competition and driving prices even higher. The Post Experts Warn BC
British Columbia’s “cooling off period” for home purchases will do little to help new immigrants make their biggest buying decision as they build their lives, according to the BC Real Estate Association (BCREA). in Canada.
The province plans to introduce legislation this spring requiring cooling-off periods for resale properties and newly built homes. The change will be similar to the cooling-off periods already in place for sales of pre-construction condominiums.
Cooling off periods are limited periods of time during which buyers can change their mind and cancel the purchase without or with reduced legal consequences.
But according to Darlene Hyde, president and CEO of BCREA, the cooling-off periods are “likely to be accompanied the high possibility of unintended negative consequences.
Talk with Canadian New Media after releasing a white paper which makes sweeping recommendations aimed at responding to the province’s ultra-hot property market, Hyde says that if potential buyers are given the opportunity to come back on an offer, they may very well make more offers, thereby increasing demand for a given property.
“Add to that with more buyers in the market due to increased immigration and what you’re doing is creating more competition for homes,” she explained.
“What we have seen from recent market conditions is (that) without addressing the root cause of the lack of housing supply, the likely outcome will be higher prices…. In order to improve affordability for all, including those immigrating to Canada…the root cause of the imbalance between supply and demand must be addressed.
A lack of supply
Canada announced this month that it aims to attract approximately 1.3 million new immigrants over the next three years to help fill critical labor shortages and fuel post-pandemic growth.
Remax, a major real estate organization in Canada, said labor market difficulties and falling fertility rates justify the need for immigration.
“On the other hand, an influx of potential buyers could further crowd an environment where housing supply is already hovering at record highs,” he said in a report titled New Immigrants struggle in overpriced Canadian real estate.
According to Statistics Canada Housing Experiences Surveytwo in five recent immigrants were dissatisfied with the state of the Canadian housing market in 2018. The study found that only 63% of recent immigrants were satisfied with their housing situation, which is below the national average of 82%.
“A ‘cooling off period’ is not the answer to alleviating the stress consumers currently face in real estate transactions,” Hyde said.
“It will not stand the test of changing market conditions, regional market differences, and does not serve buyers and sellers in the same way. It also does nothing to address the root of BC’s housing affordability problem, which is the lack of supply.
Among BCREA’s recommendations to support consumer confidence in real estate transactions are:
- Giving buyers time to research a property before making an offer by introducing a mandatory ‘pre-offer period’ of a minimum of five working days from when a property first comes up for sale. During this period, no offers can be made.
- Help consumers make more informed decisions across multiple offer scenarios by working with real estate industry stakeholders to establish a process that balances transparency for privacy-conscious buyers.
- Ensure that potential buyers have immediate access to relevant information by making ownership declarations mandatory and available upon registration.
- Mandate that all documents related to condo transactions be made available with listing, including condo bylaws, depreciation reports, reserve fund statement, condo board correspondence, and Form B .
- Raise entry qualification standards for new licensees to ensure consumers are supported by a profession that evolves with the changing marketplace.
“We call on the government and the regulator to consider BCREA’s recommendations and consider the protection of all consumers, buyers and sellers, regardless of where they live,” said Alex Goseltine, CEO of the BC Northern Real Estate Board.
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