As the New Year rolls around, so too will a promised ban on foreign homebuyers by the federal government amid growing pressure to make housing more affordable for Canadians.
As of Jan. 1, 2023, foreign commercial enterprises and people will be prohibited to buy residential properties in Canada for two years in an attempt to cool the speculation that helped propel the country’s housing market to unprecedented highs over the past three years.
Read more:
Trudeau eyes foreign buyers ban on non-recreational properties, end to blind bidding
Read More
-
Trudeau eyes foreign buyers ban on non-recreational properties, end to blind bidding
The ban, which was passed by Parliament on June 23, is a cornerstone of Trudeau’s plan to address Canada’s frenzied housing market which has had issues with limited supply, leading to bidding wars, extreme buyers’ anxiety, and skyrocketing costs.
“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.
Here’s everything you need to know about the ban.
Anyone who’s neither a Canadian citizen nor a permanent resident will not be able to purchase a residential property in Canada as of Jan. 1 for two years, according to this new rule.
The ban also includes non-Canadian company owners, which the regulations say will prevent them from avoiding the prohibition.
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.
The impact of foreign ownership has been a hot topic when it comes to Canadian real estate for years, even as attention grows on the impact of domestic investors who the Bank of Canada says make up roughly one-fifth of purchases in recent years.
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.
READ MORE: Ontario condos 35% smaller on average than they were 25 years ago: MPAC
CMHC said that “related work from Statistics Canada also reports comparably low shares of non-resident ownership for cities surveyed in 2019.”
Statistics Canada finds in its 2019 data that non-resident owners tend not to be owner-occupants. Non-residents own 15 to 20 per cent 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.
Adil Dinani, a broker with Royal LePage West in B.C., told The Canadian Press in 2021 that he took issue with the foreign buyer ban because he says foreign buyers make up a small fraction of purchasers in the country.
“They’re not the ones driving prices higher, and they’re not the ones that are absorbing or purchasing all the inventory,” Dinani said.
He pointed out that B.C. already has a 20 per cent foreign buyer’s tax, which he said the federal government should take into account.
Ontario also raised its non-resident speculation tax on homes purchased by foreign nationals from 20 per cent to 25 per cent in October this year.
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.
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.
The new law states that residential property not located within either a census agglomeration or a census metropolitan area will not be subject to the ban.
READ MORE: Challenges fuelling Canada’s hot housing market will take ‘years’ to fix: Freeland
“This generally means that 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,” MLT Aikins explains on its blog.
“The foregoing impact touches upon the federal government’s desire to exempt certain recreational properties from the ban. However, it is noteworthy that some smaller municipalities where people own recreational property will still be affected,” the law firm added.
The law also states that any land that “does not contain any habitable dwelling, that is zoned for residential use or mixed-use” is subject to the ban.
“This means that the ban will apply to certain properties that would not generally be considered to be residential at the time that a purchase occurs, but rather focuses on the potential of such land to be developed into a residential property at some point in the future,” MLT Aikins said.
Read more:
Hoping for a steep drop in home prices next year? It’s unlikely, Royal LePage says
The effects of the ban though remain to be seen, especially as the impacts of the Bank of Canada’s interest rate hikes continue to ripple through the economy and inflation — including food prices.
Fears of a recession in 2023 have roughly 41 per cent of Canadians putting plans to buy or sell a home on pause, according to a survey this fall by Re/Max.
The real estate firm forecast last month that Canada’s housing market is poised to return to “balance” in 2023 as well, with most prices set to rise outside of the most expensive markets.
— With files from The Canadian Press and Motorcycle accident toronto today.