Residential Homes More Affordable?
Starting January 1st, 2023, the Government will be implementing the Prohibition on the Purchase of Residential Property for non-Canadians Act. It’s no secret that within the past year, the housing market has been bleak. In an attempt to make housing more affordable for Canadians, buyers in the residential housing market will be limited to Canadians until January 1st, 2025, after which the regulation will be appealed and re-evaluated.
Does this affect the rental market?
The act does not apply to non-Canadians who are looking to rent. If anything, deterring foreign buyers from purchasing homes will encourage them to rent. Considering that the percentage of non-Canadian home owners varies from 2-6% (with the higher percentages in larger metropolitan areas), it’s uncertain whether the effect on the rental market will be noticeably significant.
How does this affect Canadians?
As a Canadian buyer, this may not affect you too much - although as a seller, realtor, or broker you should know that knowingly assisting in the sale of a home to a non-Canadian can result in a $10,000 fine for the accomplices and the foreign buyer. In addition, the court may order the sale of the home.
In the context of this act, the term ‘Canadians’ is defined to represent Canadian citizens, permanent residents, and all persons registered under the Indian Act. There are certain detailed exceptions for temporary residents studying or working in Canada, as well as refugees.
What is considered a “residential home”?
In the Prohibition on the Purchase of Residential Property by Non-Canadians, residential properties are defined as properties with three or less dwellings (such as condominiums, semi-detached houses, etc.) that are in a census metropolitan area and/or zones that are designated for residential use even if they are not currently occupied.
The Act also prohibits businesses who are not listed on the Canadian stock exchange, managed by a non-Canadian, or are privately held from buying residential property in Canada.
How will the Foreign Buyer Ban impact the housing market?
There are some doubts regarding how significant of a shift there will be in housing prices due to the fact that foreign buyers make up only a small percentage of home buyers in Canada. The larger metropolitan cities such as Vancouver, Toronto, Montréal comprise higher percentages of foreign home buyers.
Economists have doubts whether the ban will have an impact on housing prices due to data retrieved from New Zealand’s similar implementation in 2018. They outline that although foreign buyer transactions dropped to 0.4%, housing prices continued to soar. Whether that will be the case for the British Columbian housing market, only time will tell.
Sources Consulted
CMHC, (December 21, 2022), Ensuring housing market remains available to Canadians, CMHC, https://www.cmhc-schl.gc.ca/en/media-newsroom/notices/2022/ensuring-housing-owned-canadians McQuillan, Laura, (December 30, 2022), Will Canada’s ban on foreign home buyers make houses more affordable? Some experts have doubts, CBC News, https://www.cbc.ca/news/business/canada-foreign-buyers-ban-jan-1-experts-1.6692706 Scott, Andrew & Cortellino, Francis, (November 2016), Housing Market Insight: Canada - Foreign Ownership, Government of Canada,https://publications.gc.ca/collections/collection_2017/schl-cmhc/nh12-268/NH12-268-2016-3-eng.pdf CBC News, (August 19, 2018), New Zealand economist says foreign buyer ban unlikely to curb housing prices, CBC,https://www.cbc.ca/news/canada/british-columbia/new-zealand-foreign-buyer-ban-1.4790357
