Market Update - June 2022

PAUL: A lot of talk on the news about the province, introducing a cooling off period, and I'm wondering if you think that's good or bad.

TONY: I don't see the cooling off period solving the problem that they're trying to solve by implementing it. I see it enabling people to write offers on properties without any consequence, and therefore, you might get more people competing on a property. I could see developers using it to tie properties up, whereas, currently, they can't do that, but it takes the bite out of a subject-free offer if it's not actually a subject-free offer. So, I could see it causing more problems than it solves, and I definitely don't think it's going to reduce the average cost of a house in BC.

PAUL: Something I keep hearing too from the government is that it's not necessarily designed to cool prices. It's designed to give people time, I guess, to think. Are you finding that your buyers are coming into deals that the process just moves way faster than they're comfortable with, and they have buyer's remorse afterwards?

TONY: I could see buyers having buyer's remorse. I mean, I primarily work with listings, so but I do have associates that I refer buyers to, and I help them out in the process. I think obviously, people can have buyer's remorse if they're going into a offer without any subjects, and that offer being successful, and then they find out that in a rural area, the septic system needs repair, which is a $25,000 bill, and something else comes up that they would've caught in a building inspection, I think definitely they could have remorse. Sometimes, if people make offers on properties that don't appraise out correctly, they have to come up with a much bigger down payment to qualify because the banks will only lend on the appraised value, so I could see buyer's remorse happening there.

TONY: I mean, it's a horrible time to be a buyer when you're forced into multiple offers. However, I'm not sure that allowing those buyers to back out is going to have the desired effect because there's probably other buyers behind them ready to buy it anyway, and so they're going to end up without a house and back in square one. I always recommend that people get building inspections if they can, but sometimes, in a multiple offer situation, if you look at the house and the history of the house and you have other information available to you, you can make an educated guess that more than likely, it could be okay to go without if you have to if you really want the house. A lot of times, if people have missed three or four houses, they get buyer's fatigue, and they just want to get somewhere to live. Especially if they've sold before they've bought somewhere or found somewhere to go.

PAUL: So, if this is a problem that exists that there is occasionally buyer's remorse from a buyer, is there a process that you would recommend that would be better than this?

TONY: With strata properties, there's a requirement by the MLS and the Real Estate Board to get strata documents, right? So, you have to provide to the buyer strata documents. So that's two years worth of the strata meetings. It's a Form B, it's a Form F, it's information on the property, depreciation report for the older buildings, insurance certificate, that kind of stuff.

TONY: So, I could see a mandated requirement for the realtors who are listing a home to provide certain things. For example, if it was a rural property, it's a requirement that you provide a well or a water test report in the last six months. If you're selling a property, you have to get an independent building inspection done by a licensed building inspector. Sometimes, when you get a pre-inspection done as a listing agent, the buyers may look at that and think, "Well, that's a biased report," but a licensed building inspector would never do an inaccurate report, so that could be something. The things that the government is trying to allow people to do would be something that a listing agent could make the homeowner supply. That way, the majority of the information that buyers are sometimes lacking would be prepared in advance. This would hopefully eliminate most - if not all - of that buyer's remorse.

TONY: Financing is key. You could circumvent any potential problems with financing by having a local appraiser do an appraisal ahead of time as well. So, they're really the key things that I see that a cooling off period kind of protects the buyer from doing, and that could be something that could be mandated the same way that they do with strata corporations. I think that would be a more effective way. It would come out of the pocket of either the listing agent or out of the pocket of the person selling the home. But that all being said, I mean, the actions that have been taken such as the interest rate hikes and talking about putting a moratorium on international buyers in BC for two years, that kind of stuff is having a desired effect.

TONY: The biggest thing that spiked our market here was, in I think rural communities in general, in BC, in Canada and across North America, and even in Europe - from talking to family members that live abroad - is COVID, and it was the desire for people to leave cities and move to rural communities because now, they're never ever going to have to go back to work. But with COVID becoming more of an endemic, we're seeing less of a desire to do that. Rural community prices are balancing out quite substantially in a very short period of time.

PAUL: Everything I've heard about the cooling off period, is the government is often referencing a similar product in Australia?

TONY: In Australia, it's 0.25% fee that you have to pay if you back out of a non-conditional deal or provide prawns for the guy that is selling the house, his barbie, and a custom knife. That's what we do back there. And you can actually pay in Dollarydoos, which is the Australian currency for real estate. Anyway, I can give you more information on that if you can phone me directly. That's not a problem.

VAL: Who gets that penalty?

TONY: In Australia?

VAL: Yeah.

TONY: Whoever wins the arm wrestle. Obviously. 

VAL: It doesn't really matter. I was just curious who gets to keep it.

TONY: That's Producer Val asking silly question. No, the seller would get that.

VAL: Okay.

TONY: Whoever's property you've tied up will get that. Should go to the real estate agent for all their work. No, it'll go to the seller.

PAUL: Now that people have moved away and had a couple of years to not live in the city, live a little bit more of a rural lifestyle, do you think we might see this go the other way now that there are people that have tried living in a smaller community for a year or two years, and they've decided it's not for them, and now they reverse course to a larger center? Or is this just the way that it is now?

TONY: Yeah, definitely, what I've seen is a lot of people have moved here. So, anecdotally, to the Sunshine Coast specifically to here. The ferries and people having to go back to work, that's the biggest factor where we're kind of seeing people decide, "There was a reason I lived in the city. What was I thinking moving to the Sunshine Coast!?" and now starting to move back as quickly as possible. So, you're seeing quite a bit of that happening. That was, I think, being able to go shopping after 7pm. at night kind of thing, be able to get some takeaway food at 11:00 at night, to be able to order a pizza at 10:00 kind of thing, stuff that people take for granted in the city, you don't get in rural communities.

TONY: Any rural community I find that has high-speed internet or access to high-speed internet has been an area that's really boomed as far as property values and stuff go, but now, yeah, exactly. We're seeing people decide that there is a reason that most people go to cities to live especially when they work there and being called back to work and corporations not giving up that high priced real estate downtown, the writings on the wall that people are not only having to go back now part-time, that's probably going to get more and more frequent. There are obviously companies that have completely decentralized and got rid of that, but the vast majority of companies seem to still want people to come in at least part-time, and that becomes a big problem especially on the Coast when you're dealing with BC Ferries and in summer when it's unreliable, it becomes a three-hour commute or a four-hour commute no matter which way you cut it. I mean, that's a lot to take on.

PAUL: The Bank of Canada has given us a few interest rate increases this year already, and I think that the belief is that we're going to continue to see the rate slowly ratchet up as we move further into 2022. We're coming off of two years of crazy price increases, so do you see those things kind of combining all at once that people are maybe ready to go back to the city, rates are going up, and prices have maybe hit a plateau? Do you think that then over the course of the summer on the Sunshine Coast, we're going to see it continue to be busy? Or is it going to pull back a little bit?

TONY: I think it's definitely going to pull back. I've already noticed some of that, yeah, in the last month or so. The people going back to the city, it's not necessarily that they've moved here. I think a small percentage of them have moved here and are now like we got to get out of here. The drive was really for families and that kind of stuff coming over here. I think with COVID pushing people out to rural communities because they're afraid of the plague, and they want to get away, and they want a buffer if they can get it, that not everyone moved here, but it did raise the collective awareness of the Sunshine Coast.

TONY: Our underlying primary buyer group is still retirees, and that was pre-COVID. The majority of the buyers moving here were retirees and some young families. I think that there's less drive now for people with COVID being an endemic as opposed to a pandemic to move to rural communities, and so therefore, we're not seeing those as many of those younger buyers coming here, and that's really what's cooling the market off. I mean, obviously, the interest rate hikes, that kind of thing are reducing the amount of money that people qualify for, and with the prices being where they are, there are fewer buyers in those brackets, and so those prices are going to be coming down, and we've already started seeing them coming down.

TONY: The canary in the coal mine for me are the condos and townhomes that aren't age specific or aren't designed for people that have large custom homes, and now, they want to age in place. The developments that are targeting them, I don't see them adjusting too much in price, but your bog standard townhome and condos that you get on the Sunshine Coast that people were coming here to buy a house, not being able to afford a house and then going to buy those condos, they're the ones that immediately, we're starting to see not getting multiple offers anymore and balancing out as far as their pricing goes.

TONY: In general, I think that probably by fall, we're going to be in a much more of a balanced market over here, moving towards probably a buyer's market by the middle of next year, and that's kind of following that seven to 10-year cycle. It's just that we really spiked with COVID and us kind of being so close to Vancouver having that infrastructure that people had to be able to work from home. Really, we saw a big surge in those people coming, and now, it's going to go back to more normal, I think.

PAUL: If locals on the Sunshine Coast then are thinking that they want to sell their home in June, what is your advice to them?

TONY: They want to sell their home in June. So, if they've got somewhere to go already or if they're leaving the Coast or if it's an investment property, I'd get on it immediately because I think it's going to be several years before we get back to where the prices are now. Even though it's softened a little bit, if they're just looking to do like a sell and buy somewhere else or maybe move up, it doesn't really matter as long as you're not out of the market for too long. An argument could be said if you have the means to sell now and have a longer close and then look in fall to try to buy somewhere. That may be advantageous, but I mean, it's quite stressful selling your house especially if you don't have anywhere to go, so you got to have some nerves of steel to be able to do that.

TONY: Of course, back in January two years ago, pre-COVID, COVID hit, and I was sure I was going to be driving Uber or doing something else, and then all of a sudden, this happens. So, I mean, it's tough to make predictions especially coming off the two years that we've had, but based on what the government's doing to curb inflation and as a result, trying to make housing more affordable, I think that all those things are going to hit at the same time, and you're going to see a much quicker transition between a seller's market and a buyer's market than you normally would.

PAUL: Is that something that's harder for sellers to accept than it is buyers? Buyers maybe feel like they've kind of had the screws put to them for a couple years, so anything that hints that they get a lower price, they're all over, but how long psychologically does it take for a seller to accept that the price was X, but now, external factors have changed that and it's X minus 5%?

TONY: I think between 45 and 60 days. I guess it's also, it depends on what advice and that type of stuff that they're being given by the realtors or people that they're engaging. I find real estate's one of those professions where everyone will watch a reality show about buying houses or flipping houses or whatever, and they've all ... Typically, everyone's bought and sold at least one place in their life, and so therefore, it's quite common for people to put their expert hat on and believe that they understand the market. So, depending on the particular individual, they may never accept that reality.

TONY: What I've been saying to buyers that I work with is even though you're buying at the peak of the market now, as long as you're going to hold that property for three to five years, statistically, you're probably going to come out okay. There are still properties that are commanding top dollar over here. I mean, that's obviously waterfront, stuff with a really nice view, new builds, anything under five years old and a detached home seems to get a lot of action on it and then anything with secondary suites or anything that is within a zoning area that allows short-term rental or has a legal suite in it or a suite that can be rented out that banks acknowledge as being revenue, so they qualify for more money. Those properties are still in quite high demand. Everything else has kind of softened off a little bit.

PAUL: What do you have coming up in June, Tony? Any new listings that you've got coming on the market?

TONY: So, I work with a few developments. So, I have some new attached product coming on the market. So, phase two of Eagle View will be coming on. There's a couple other buildings in that area, which I can't really give specifics about now but also nice ocean view suites, condos that are between 1,300 and 1,700 square foot with electric vehicle chargers, that kind of stuff, so again, more product geared towards a retiree coming here. A lot of the retirees that come to the Sunshine Coast spend half their time south of the border, whether it be Florida or Palm Springs or whatever. So, a lot of them are looking for those three to four months a year that the Sunshine Coast is kind of beautiful. I've got quite a bit of product coming up there, some acreages coming on, and then just some regular detached homes, that kind of thing.

TONY: So, I'm finding it like there is still much lower inventory than I normally carry, so I'll normally carry 40 to 50 listings, and now, I'm carrying 15 to 20 listings. That's just the amount of people that are looking to sell their home seems to have dropped, and a lot of people on the Coast, if they sell here, where are they going to go? I mean, Powell River's an option, but that's a little bit too remote for some people. Where else is as beautiful as Gibsons or all the Sunshine Coast in general? So, I think that's one thing that COVID's done is made us really appreciate where we live.