What are the Implications of BC's Homebuyer Protection Rules for the Rest of Canada?
On Jan 3, the B.C. government implemented new rules designed to protect homebuyers from “being pressured into high-risk sales.”1 A Canadian first, this set of rules introduces a mandatory cooling-off period of 3 days in the purchase of most homes.
During this interlude, buyers can arrange financing or, more important, a home inspection. Most important of all, they can choose to back out of their purchase by paying a nominal financial penalty of 0.25% of the agreed-to price.
How much is that? Walking away from a million-dollar purchase would cost the would-be buyer $2,500, which goes to the seller.
The rules are meant to protect consumers during an emotional time. There was concern that buyers are susceptible to risky non-conditional purchases, especially after these recent years of feverish real estate market conditions in B.C. This new legislation is intended to address that concern, protecting consumers without harming sellers.
How is this affecting B.C.’s market?
Market values have sunk significantly lately, and the trend is expected to continue, but whether that has much to do with the new cooling-off period is hard to say. Consider: the cyclical nature of the market was already trending downwards.
Plus, the post-pandemic economy is sluggish, wracked by inflation which has led to multiple interest rate increases. However, the British Columbia Real Estate association is calling for a strong market rebound in 2024.
What are the implications for Canada’s other real estate markets? And your practice?
In 2017, Vancouver introduced an Empty Homes Tax. This year, BC is expanding its speculation and vacancy tax. And you may recall, we recently posted about new vacant home/unit taxes in Ontario’s biggest cities.
Other provincial governments are watching B.C. Will they adopt similar rules regarding cooling-off periods? The issue isn’t as predictably binary as, say, rural versus urban. After all, a home purchase is the biggest financial decision and commitment of the vast majority of voters. It’s a worry-inducing time, and emotional people are more motivated to vote.
Meanwhile, despite last year’s many calls back to the office, a segment of white-collar employees are still spending much of their time working remotely. That is, from home.
Consider the effect on real estate when workers feel less need to live in Canada’s biggest cities. In November 2022, HGTV reviewed the 10 hottest real estate markets in Canada2, where prices – unlike the trend in Canada’s biggest cities – were climbing fast, from 16.4% to 21.7% over a year. Not one of these markets was in southern Ontario or southern B.C.
So, perhaps the bigger question is: What are the implications of possible consumer-protection rules for your clients and your business, regardless of where they live?