Canada bans foreigners buying residential property
Canada has imposed a two-year ban on foreigners buying residential property in the country. The ban is temporary and does not apply to permanent residents, international students, diplomats and consular officials.
Also exempt are vulnerable persons who already have temporary visa who are fleeing a conflict or those who have already filed a refugee claim in Canada.
The ban was first proposed in the government’s Budget 2022 as both federal and provincial governments struggle to cool off a hot Canadian housing market. Speculative investment in Canadian real estate as fueling inflation in the housing market.
Speculative demand from foreign investors is in part to blame for record home prices in major metropolitans in Canada. The ban prohibits foreigners from acquiring non-recreational, residential property in Canada for a period of two years.
The government does not want rising house prices to push working-class and young Canadians out of the real estate market. According to Finance Minister Chrystia Freeland:
“We will make the market fairer for Canadians. And we will prevent foreign investors from parking their money in Canada by buying up homes. We will make sure that houses are being used as homes for Canadian families. Rather than as a speculative financial asset class.”
The ban also prevents foreigners from buying residential property through corporations.
There are penalties of up to $10,000 for those who break the law, and the government can sell off property bought in breach of the ban.
Canadian housing market is overheated
The government is under pressure to cool an overheated market after prices climbed by more than 20% last year. And rental rates have also been rising.
Between 2020 and 2022, the average house price increased by more than 51 percent, to 868,400 Canadian dollars.
According to federal finance department, foreign investors are fueling housing costs in cities like Vancouver and Toronto. This is pricing Canadians out of the housing market in cities and towns across the country.
This perception and concern have been around for some time. It is also a hot political issue resulting in provincial government efforts to discourage it. In 2016, British Columbia introduced a 15 percent tax on home and condo purchases by foreign buyers. In March 2022 Ontario raised its own tax to 20 percent and extended it to cover the entire province.
Canada to double new homes over next decade
Budget 2022 also includes billions in spending for new housing to double the number of new homes over the coming decade. These include new homes in cooperation with provincial and territorial governments, municipalities, and private and non-profit sectors. The budget will also help local governments update their systems to allow faster construction of new properties.
“We will invest in building more homes and in bringing down the barriers that keep them from being built. We will invest in the rental housing that so many count on. We will make it easier for our young people to get those first keys of their own.”