British Columbia real estate

As of January 3, British Columbia is requiring a three-day “cooling off” period for real estate transactions after the buyer has signed a contract.

The B.C. government introduced the new policy in response to the staggering real estate demand seen throughout 2020 and 2021. To stay competitive, buyers were omitting home inspections and other requirements from their offers. The three-day period should provide buyers with extra time to complete home inspections and arrange financing, the government said in a statement.

“Lack of time for buyers to complete due diligence can exacerbate risk or be used to hide property defects that otherwise may have been discovered,” said housing analyst Leo Spalteholz, in the statement. “Though the market has cooled dramatically in recent months, it’s good to proactively put buyer protections in place.”

The buyer can back out of the sale at any time during the three-day period, which doesn’t include weekends or holidays. If the buyer does back out, they’re required to pay the seller 0.25 per cent of the purchase price. This cancellation fee is meant to prevent buyers from placing offers on multiple properties and then backing out last minute. Prior to the new policy, if a buyer backed out after signing a purchase agreement, they could be sued by the seller for money lost on the sale of the home.

The three-day period applies to almost all real estate transactions, including detached homes, townhouses, condos, and cottages. The only exemptions are real estate on leased land, real estate bought at auction, or real estate bought under a court order. Otherwise, the cooling off period is mandatory and can’t be waived.

But with changes to the market, experts are questioning whether the new policy will have any impact.

After hitting a peak in 2021, the province’s real estate market has seen significant drops in recent months. The B.C. Real Estate Association reported 4,512 sales this past November, a 50 per cent decrease from last year. And prices are trending downwards. In November 2021, the average B.C. home price was $992,245. In November 2022, it was $906,785.

This drop in competition is what’s allowing buyers to include home inspections once again in their offers, not the addition of three extra days, said B.C. Real Estate Association CEO Trevor Koot.

“Anybody that’s bought a house in the last 10 years can tell you, you can’t get an appraisal or an inspection done within three days of an accepted offer. The resources are just not there,” he said. “It’s our concern that it then provides a false sense of security to buyers in a heated market, that they go in thinking, ‘Oh, I’ve got time to do my due diligence,’ when really, what realtors will suggest, is that due diligence is done in advance.”

There’s also concern that the three-day policy puts sellers at a disadvantage. “Very often sellers are buyers themselves,” Koot said. “They’ve got a purchase going on that they’re going to be moving into, and all of a sudden, for three days, they have uncertainty. They don’t necessarily know whether the buyer will follow through.”

When the government introduced the three-day policy in 2021, the B.C. Real Estate Association responded by creating a list of 34 recommendations they felt could help improve the province’s real estate market. Koot said the association worked closely with the B.C. Financial Services Authority (BCFSA), the industry’s governing body, to develop the list. But when the list was passed on to the Minister of Finance, it was ignored.

This is where the government dropped the ball, Koot said. Rather than a three-day cooling off period, the B.C. Real Estate Association had proposed a five-day pre-offer period. This would require all listings to advertise for five days before accepting an offer. The five mandatory days would prevent bully offers where buyers swoop in with aggressive bids, telling sellers they only have a few hours to respond.

“That disrupts everything,” Koot said. “It changes the dynamic, it creates pressure, and it pushes the market into an unhealthy environment.”

A five-day pre-offer period would prevent bully offers and provide buyers with time to assemble their bids without leaving sellers in the dark for three days.

“We shouldn’t have to implement policy and adhere to new rules that don’t have any relevance and impact,” Koot said. “We need policy that’s based on good information, good data, and good research.”

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It’s no secret—similar to the rest of the country, Western Canada’s cottage prices are on the rise. According to Royal LePage’s Recreational Property report. B.C. is expected to see the average price of a cottage jump in 2022—a 12 per cent increase to a $1,029,280 average. This trend has continued from 2020, as the average price of a recreational property in B.C. increased by 22.4 per cent to $919,000 in 2021.

The closure of international borders during the pandemic drove cottage prices up as many Canadians sought domestic retreats. But even with international borders reopening, the prices continue to rise.

Unlike Ontario and Quebec, B.C. and Alberta don’t have well-defined “cottage countries.” Any waterfront properties that the provinces have are on the ocean or on a few specific lakes.

Since the areas where you can buy a recreational property in B.C. and Alberta are limited compared to central Canada, the surge in demand during the pandemic has kept inventory low and prices high.

Year-over-year increase of recreational property price in B.C. in 2021

All of British Columbia’s landlocked recreational properties saw an average price increase in 2021. Invermere, near the Alberta border, saw the largest change with an 88.1 per cent increase from $354,000 to $666,000. This was followed by the Comox Valley area, which saw a 28.7 per cent increase from $610,000 to $785,000. And then Pemberton, 25 minutes north of Whistler, increased 24.7 per cent from $1,000,000 to $1,247,000.

In terms of waterfront properties, Central Okanagan saw the biggest jump, with a 20.2 per cent increase from $1,955,000 to $2,350,000.

Who are the buyers?

The people buying waterfront recreational properties in B.C. right now are wealthy families, says Francis Braam, a Royal LePage broker in Kelowna. “Nobody else can afford it. You’re not buying a $4 million property to use on the weekend unless you have a lot of dough.” The same holds true for ski chalets, Braam says.

Interestingly, what Braam isn’t seeing lately is foreign buyers. He points to Big White Ski Resort in Kelowna as an example. “At Big White, we used to have a lot of foreigners who bought property—Europeans, Australians, Americans, they’re gone. It’s 100 per cent a Canadian market now,” he says. “They couldn’t get in for the last two years. Will they ever return? I don’t know. It’ll take time.”

What’s selling and what isn’t?

The average price of a recreational property in B.C. tends to balloon thanks to a couple exclusive areas, namely Whistler and Okanagan Lake. In 2021, the average price of a recreational property in Whistler increased by 14 per cent to $2,738,000. Whistler’s considered one of the best ski resorts in Canada, making chalets close to the hill extremely desirable.

The same applies to Okanagan Lake, which stretches 135 kilometres in length and is home to around 400,000 people. Although, many of the properties on Okanagan Lake are permanent homes, not just cottages, Braam notes. Since Royal Lepage isn’t able to discern what the property’s being used for, these waterfront homes are included in the company’s report, driving up the aggregate price of recreational properties in the area.

Another peculiarity with the report is that it recorded a drop in price for North Okanagan waterfront properties. Out of every cottage market in Canada, this is the only one to see a decrease in price, dropping 3.8 per cent from $1,403,000 in 2020 to $1,350,000 in 2021.

“That would be an anomaly,” Braam says. “If you took a house that sold 18 months ago on the water and then put it on the market today, it’d be worth more money.” What likely happened is that the more affordable properties on the lake sold in the last 18 months or in the last quarter, skewing the aggregate price, he says. “There’s no way the price of that product has gone down.”

Future predictions for B.C. real estate

In the real estate market around Kelowna, Braam says he’s already seeing prices settle. “I don’t think prices are going to drop, but we’re not going to maintain the same pace of two to three per cent per month the way it’s been going up for the last 18 months.”

Thanks to the province’s limited supply of available cottages, Braam doesn’t expect the market to crash. Even now, he only has a month’s worth of available listings. Supply in B.C. is likely to stay low. When you look at the province’s geography, Braam says development is restricted by lakes and mountains. Plus, B.C. has an agricultural land reserve, where large swaths of land are devoted to agriculture.

This means that the province is often restricted to tearing down old homes and building new ones, which is more expensive than developing on available land, Braam says.

“Thirty years ago, we could build a house in 90 days. That same house takes nine months to build now or a year,” he says. “It’s more complicated to build, the consumer has demanded more, they’re not as simple houses to build, and the building code has also made it much more difficult.”