Canada Bans Foreign Home Buyers in an attempt to cool speculation
As of Jan. 1, 2023, foreign commercial enterprises and people will not be allowed to buy residential properties in Canada for two years.
Why is this being done?
This is a federal attempt to cool the speculation that has pumped up the Canadian housing prices over the past three years.
Canadian residential real estate has been bombarded with issues such as limited and fast depleting supply, bidding wars and skyrocketing prices. Not to forget the intense stress and regret for the hopeful buyers who have been priced out.
“Through this legislation, we’re taking action to ensure that housing is owned by Canadians, for the benefit of everyone who lives in this country,” said Housing Minister Ahmed Hussein in a press release on Dec. 21.
What measures are being taken to enforce the ban?
In addition to individual foreign buyers, the ban also includes non-Canadian company owners, which will prohibit them to evade the ban. Non-Canadians found in contravention of the ban will be fined up to $10,000 and may be ordered to sell the property, according to the legislation.
How big is the current share of foreign buyers?
The Canada Mortgage and Housing Commission released its 2020 Condominium Apartment Survey results in May of 2021, saying that “the share of non-resident-owned condominium apartment units was in the low, single-digits in most of Canada’s largest centres.”
Cities like Vancouver, Toronto, Montreal, and Ottawa had shares above one per cent.
Statistics Canada finds in its 2019 data that non-resident owners tend not to be owner-occupants. Non-residents own 15 to 20% of non-occupied units in Toronto and Vancouver.
This suggests that non-resident ownership is concentrated in the secondary rental market. CMHC and Statistics Canada results combined suggest that in the secondary rental market, non-resident ownership is likely concentrated in newer and larger rental buildings,” CMHC said.
“These buildings generally command higher market rents,” it added.
Canada Bans Foreign Home Buyers – What is their Current Share of the Pie?
It can well be argued that foreign buyers make up only small fraction of purchasers and that they are not the ones driving prices higher, or purchasing all the inventory.
It is worth noting that Ontario raised its non-resident speculation tax (NRST) in October 2022 on homes purchased by foreign nationals from 20% to 25%. B.C. also already has a 20% foreign buyer’s tax. so measures are already in place to contain foreign investment.
Are there any exemptions to the ban?
Yes, there are some exceptions, including for those with temporary work permits, refugee claimants, and international students who meet certain criteria.
According to MLT Aikins, a law firm, “refugees and non-Canadian individuals who purchase residential real estate with a spouse or common-law partner — provided that their spouse or common-law partner is a Canadian citizen, a permanent resident of Canada, a person registered as an Indian under the Indian Act or a refugee”, can also be exempted from the ban.
Please note that the legislations are often complicated to interpret, so it’s always a good idea to consult a lawyer for advice or guidance.
What type of properties are affected?
- According to CMHC’s website, the ban applies to residential property, which includes detached houses or similar buildings of one to three dwelling units, as well as parts of buildings such as semi-detached houses, condominium units, or other similar premises.
- However, recreational properties like cottages or lake houses will be exempt from the ban, CMHC added.
- Municipalities with a core population of less than 10,000 people will not be subject to the ban, whereas communities with a core population that is greater than 10,000 people will be impacted.
- Some smaller municipalities where people own recreational property will still be affected.
- Any land that does not contain any habitable dwelling, that is zoned for residential use or mixed-use, is subject to the ban.
Where can I find more details?
These are just some of the take-aways. Read more detailed information from CMHC on the Prohibition on the Purchase of Residential Property by Non-Canadians Act. Also read about what you need to know about the Prohibition on the Purchase of Residential Property by Non-Canadians from the Canadian Real Estate Association (CREA).
For further questions and clarifications, it is prudent to consult with Immigration Lawyers, Real Estate Lawyers or contact the Ministry of Finance at Toll free: 1‑866‑668‑8297.
What does this Act mean for Buying, Selling Real Estate in 2023
The effects of the ban remains to be seen, especially as Bank of Canada’s interest rate hikes continue to impact Canadian economy and inflation.
About 41% of Canadians putting plans to buy or sell a home on pause, due to fear of a recession in 2023 according to a survey by RE/MAX. The 2023 Forecast by RE/MAX Canada suggests that the Canadian housing market is poised to return to “balance” in 2023 as well, with most prices set to rise outside of the most expensive markets.
Content credit: globalnews.ca