Coupled with billions of dollars of investment in construction, the Canadian government have moved to implement a two year stop on foreign home buyers. This is viewed as an attempt to cool off a hot housing market.
Passed in August and effective now, The Budget Implementation Act contains legislation called the Purchase of Residential Property by Non-Canadians Act which prohibits non-Canadians from purchasing any residential property in Canada. The legislation will last for two years.
Background to the Legislation
The government recently released its budget and addressed concerns about the rising cost of living in Canada. Specifically, in a section of the document dedicated to housing affordability, Canada’s Deputy Prime Minister Chrystia Freeland called for a two-year ban on some foreign buyers.
This statement move from the Canadian Prime Minister, is aimed at effectively calming one of the most expensive housing markets in the world. This may also signal that there are concerns over public unrest over inflation and expensive housing.
Over the past two years, Canadian house prices have seen an increase of more than 50%, with an average home inflating to an all-time high of C$869,300 ($693,000).
With these price increases across the majority of cities, the country has become an increasingly appealing investment opportunity for those looking to make a profit.
Published in 2019, a report concluded that c.8% of Vancouver homes were owned by non-residents as well as 4% in Toronto and 4.3% in Halifax. The joint report by Statistics Canada and the Canada Mortgage and Housing Corporation shows that condos have a much higher rate of ownership among those who don’t reside there. For example, Vancouver’s rate is 11.2%, while Toronto’s is 7.6%.
Exemptions to the Legislation
There are specific instances where exemptions will be available to non-Canadian individuals living in Canada, which include:
- Temporary residents of Canada, such as students and foreign workers working under federal work permits, who fulfil criteria established by legislation;
- persons who have been granted refugee status;
- A non-Canadian who purchases a home with their spouse or common-law partner but only if the spouse or common-law partner is a:
- Canadian citizen;
- permanent resident of Canada;
- Temporary Resident; or
- Protected Person
Canada’s New Legislation Will Affect the Mobility Industry
The above policy, has been met with some scepticism, as the other side of the coin suggests that foreign money is truly a major price driver in Canada.
Simeon Papailias, founder of real estate investment firm REC Canada stated, ‘I don’t think prices are going to fall as a result, though I do think it takes away at least some of the competition in what is the most competitive market in Canadian housing history. I don’t think a two-year band-aid is going to have an impact on what’s a fundamental lack of supply.’
In reaction to the legislation, Lynn Shotwell, president and CEO of Worldwide ERC, said, ‘It’s encouraging that the law provides an exemption for temporary foreign workers. Our colleagues at CERC are working to educate the government on the critical role RMCs play in these home purchases and to ensure that the implementing regulations support international assignments. Worldwide ERC’s government affairs council supports their efforts.’
Worldwide ERC will closely follow the Prohibition on the Purchase of Residential Property by Non-Canadians Act and any possible exemptions that may affect the mobility industry.
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