Last week the provincial government announced new legislation changes that are supposed to take place sometime in spring 2022. The upcoming changes are our government’s attempt to cool down the housing market. Unfortunately the new changes, in my opinion, will have very little effect on the housing market and only serve to hurt consumers, rather than help them. The last time the government tried to introduce legislation to cool down the real estate market was the introduction of the foreign buyer’s tax and the empty homes tax, and as we can see both of those initiates have failed miserably.
For those of you who missed the announcement, you can click the link here to see the official statement. I have also included a more comprehensive breakdown of the changes in a PDF which you can download by clicking the link at the bottom of this email underneath my signature. Although I don’t have time to go into each of the changes in this email as I still have the Vancouver Market Report to discuss, I did want to speak about the “cooling off” period the government is planning to implement.
For anyone who has purchased a presale condo from a developer, you may (or may not) be aware of your right to rescind your offer within seven days of signing the contract for any reason. Developer disclosure statements are typically 40-50 pages long (and sometimes much longer, depending on how many amendments have been filed) and their contracts are always drafted by the developer’s lawyers and are heavily skewed in favour of the developer. Many times a consumer will walk into a sales center for a development and are not with their realtor, and end up relying on the developer’s sales team to guide them through the process. Typically, most people do not have the time to go through an entire 25-page contract and a 40-50 page disclosure statement in the time that they are in a sales center. Consumers may also get “caught up” in the moment of being in a beautiful sales center with a friendly salesperson who is more than happy to tell you about all the perks of this new development. Only later does the consumer realize they may have made a mistake in signing a contract on the spot. For these reasons (and others) is why we have a 7 day recession period for presales. Unfortunately, these reasons do not translate to resale sales.
In a typical resale transaction you have two parties involved, the sellers, and the buyers. The sellers and the buyers are almost always represented by a real estate professional and are more or less to be considered evenly matched. In other words, it is a different scenario than a consumer walking unrepresented into a sales center operated by a major developer such as Concord and Bosa and only dealing with their sales staff and signing a heavily one-sided contract. A seller in a resale transaction could have many reasons they are selling, such as the loss of a job, being transferred, downsizing, upsizing, etc, in other words, for personal reasons as opposed to business reasons. A cooling-off period would allow any buyer to back out of a contract for any reason with no consequence to them. This could be extremely detrimental to a seller as it would be very difficult to discern how serious a potential buyer is. What is to stop a buyer from making multiple offers on multiple properties while they consider which property they want to purchase? This could be very harmful to a seller who unnecessarily ties up their property in a contract that has no chance of completing and losing out on offers that were actually serious. Meanwhile, the serious buyers move on and miss an opportunity to purchase a property they really liked.
When a system is in place it is much easier to do harm to that system by trying to change it than it is to improve it. The issue with housing prices is not going to be solved by empty homes taxes, cooling-off periods, or foreign buyers taxes. Our housing market is governed by supply and demand and our issue is lack of supply. I have been banging the drum for months now about our lack of supply and have presented many different obstacles we face as well as possible solutions. If you have any questions about these announced new changes please feel free to reach out to me at any time.
Monthly Market Report
Home sale activity in Metro Vancouver remained above historical averages in October while the overall supply of homes for sale dipped to levels not seen in three years.
The Real Estate Board of Greater Vancouver reports that residential home sales in the region totalled 3,494 in October 2021, a 5.2 per cent decrease from the 3,687 sales recorded in October 2020, and an 11 per cent increase from the 3,149 homes sold in September 2021. Last month’s sales were 22.4 per cent above the 10-year October sales average.
Home sale activity continues to outpace what’s typical for this time of year and the pool of homes available for sale is in decline. This dynamic between supply and demand is causing home prices to continue to edge up across the region. There were 4,049 detached, attached and apartment properties newly listed for sale on the Multiple Listing Service in Metro Vancouver in October 2021. This represents a 27.3 per cent decrease compared to the 5,571 homes listed in October 2020 and a 21.7 per cent decrease compared to September 2021 when 5,171 homes were listed.
The total number of homes currently listed for sale on the MLS® system in Metro Vancouver is 8,034, a 35.3 per cent decrease compared to October 2020 (12,416) and a 13 per cent decrease compared to September 2021 (9,236). Rising fixed mortgage rates should eventually help ease demand, but for now sales remain strong and buyers with rate holds will remain motivated to find a property for the rest of the year.
For all property types, the sales-to-active listings ratio for October 2021 is 43.5 per cent. By property type, the ratio is 33.6 per cent for detached homes, 64.4 per cent for townhomes, and 46.7 per cent for apartments. Generally, analysts say downward pressure on home prices occurs when the ratio dips below 12 per cent for a sustained period, while home prices often experience upward pressure when it surpasses 20 per cent over several months.
The MLS Home Price Index composite benchmark price for all residential homes in Metro Vancouver is $1,199,400. This represents a 14.7 per cent increase over October 2020 and a 1.1 per cent increase compared to September 2021.
Sales of detached homes in October 2021 reached 1,090, an 18.4 per cent decrease from the 1,335 detached sales recorded in October 2020. The benchmark price for a detached home is $1,850,500. This represents a 20.5 per cent increase from October 2020 and a 1.2 per cent increase compared to September 2021.
Sales of apartment homes reached 1,801 in October 2021, a 14.7 per cent increase compared to the 1,570 sales in October 2020. The benchmark price of an apartment home is $746,400. This represents a 9.5 per cent increase from October 2020 and a 1.1 per cent increase compared to September 2021.
Sales of attached homes in October 2021 totalled 603, a 22.9 per cent decrease compared to the 782 sales in October 2020. The benchmark price of an attached home is $975,000. This represents an 18.5 per cent increase from October 2020 and a 1.2 per cent increase compared to September 2021.