Cooling-off period for B.C. homebuyers won’t help affordability, real estate industry says

It’s as hard as ever to buy a home in British Columbia, and with that in mind, the government is planning to bring in a cooling-off period later this year.

But the real estate industry is pushing back, arguing it won’t actually make it more affordable to buy a home.

The cooling-off period would give buyers a brief period of time to pull out of a deal if they changed their mind.

BC Real Estate Association (BCREA) chief executive Darlene Hyde is concerned about unintended consequences for sellers, a major theme in a new industry white paper outlining counterproposals to what the province has in mind.

“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 Hyde during a news conference. “We were 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, and worsening affordability due to an increase in frivolous offers and numerous other factors,” she said.

“Such a measure could cause a domino effect, or chain of rescissions on dependent transactions, widely disrupting the market, and we would expect an increase in list prices, as sellers seek to price in the uncertainty of the sale of their property.”

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The BCREA’s economics team estimates a 10 percent increase in bids would increase list prices by 2 to 3 per cent.

Housing economist Tsur Somerville with UBC’s Sauder School of Business says the real estate industry’s proposals — probably don’t go far enough to address public concerns.

“There’s a little bit too much of a flavour of, ‘Let’s try to keep things the way they are,’ and not enough attention to really what might be the concerns of buyers and sellers in the market,” Somerville told CityNews.

“It’s not that there aren’t merits in all the things they recommend — it’s just a question of whether they go far enough.”

But Somerville believes the industry is right to be concerned that the cooling-off period could lead to frivolous offers from flighty homebuyers,

“Any cooling-off period has to have some aspect of a non-refundable deposit,” Somerville said. “There has to be some cost to making an offer that’s not a legitimate, good-faith offers … It’s pretty clear that to avoid some of the problems associated with a cooling-off period, there has to be a cost to a buyer to actually terminating the sale,” he said.

“If you look at a lot of [the industry’s concerns], those are concerns that might be partially mitigated by that kind of arrangement.”

Either way, Somerville believes without a greater supply of homes, we won’t see a meaningful improvement to affordability.

B.C.’s Finance Minister, Selina Robinson, said in a statement that the real estate industry has a “vested interest in the market being hot.”

She went on to write, “In an overheated housing market, we have seen concerns that buyers feel pressure to waive conditions like inspections to get their foot in the door. We want to make sure that buyers have time to get the information they need to make a sound decision that is right for them.

“The specifics of a cooling-off period in B.C. will be informed by consultation and analysis by the BC Financial Services Authority.”

The debate comes during a remarkable run for real estate in B.C., with the Real Estate Board of Greater Vancouver reporting that the benchmark home price hit $1.2-million in January — a rise of 18.5 percent since the same month last year.