As of 1 January 2023, Canada bans foreign home buyers, a move aimed at curbing unproductive foreign ownership and bringing down housing prices across the nation.
The foreign buyer prohibition, which is supposed to expire in 2025, has been met with mixed reactions from people across the country as some favour the move, and of course, others oppose it. This is just one of several housing policies adopted by the government, including a 10-year national housing strategy and new investments for low-income Canadians.
With the new law in place for some years now, it’s worth exploring what this means for the future of Canadian real estate and the foreigners wishing to acquire property here.
In this blog post, we’ll look at how Canada’s ban will impact foreign home buyers, the potential implications this could have for real estate, and how a mortgage broker can help foreign buyers navigate this.
What Does The Ban On Foreign Home Buyers Mean For Canada?
The ban on foreign home buyers in Canada is intended to slow down the rapid appreciation of housing prices in the country.
According to Aljazeera, The Canadian Real Estate Association reported that the national average cost of buying a home had reached a record high of $524,324 (Canadian dollars) in March 2021, a 31.6 percent increase from 2020. This was largely driven by soaring property values in and around Toronto and Vancouver metropolitan areas.
The high discrepancy between the high real estate prices and the average Canadian household income reduced the opportunities for Canadians to purchase a home without having to face competition from foreign buyers.
In fact, many Canadians under 40 have admittedly given up hope of ever owning a property.
What Are The Experts Saying?
Many Canadian experts question the effectiveness of the ban in reducing prices, and believe it would have little effect in Toronto and Vancouver, where increased provincial taxes have already targeted foreign home-buying.
Thomas Davidoff from the University of British Columbia advised Aljazeera that reducing demand overall is expected to lead to lower prices and that banning foreign buyers could have an effect in Canadian cities that do not already impose high taxes on foreign real estate investments.
Diana Mok from Western University, Ontario, told Aljazeera that it’s still unclear how the government’s foreign homebuyer prohibition will affect real estate prices. She noted that an approach which addresses housing affordability and ensures that salaries keep up with increased living costs would be a better solution.
Is Anyone Exempt From The Law?
Although foreigners are generally prohibited from buying residential properties in Canada’s major cities, there are a few exceptions.
Foreign nationals can still purchase vacation homes, mobile homes, and recreational properties such as cabins or cottages. These types of properties are exempt from the ban on foreign buyers and can be bought and enjoyed by non-residents.
Furthermore, international students and foreign workers that have been present in Canada for a certain number of years, as well as those with temporary resident status, may also purchase one residential property — as long as they intend to become permanent residents.
Also, refugee claimants, diplomats, consular staff and members of international organizations living in Canada can continue to buy properties without further restrictions.
There are also exceptions for residential properties in less-populated areas.
Is There Any Way Around The Ban?
Not really! The law states that non-Canadians are prohibited from purchasing any residential property in Canada, and any person or entity that counsels or assists a non-Canadian in doing so is guilty of an offence.
Furthermore, if a corporation or entity commits this offence, any individuals or entities that directed, authorized, assented to, acquiesced in, or participated in the commission of the offence are also liable for it. This applies even if the corporation or entity themselves have not been prosecuted or convicted.
This includes officers, directors, agents, mandataries, senior officials, and any individuals authorized to exercise managerial or supervisory functions on behalf of the corporation or entity.
How Can a Mortgage Broker Help?
If you are a foreigner interested in buying a real estate property in Canada, a mortgage broker — knowledgeable on the current laws and regulations surrounding the ban on foreign home buyers — can help you navigate the complexities of the purchasing process.
They can provide assistance in understanding the foreign buyers tax, the requirements for obtaining a mortgage, and any potential exemptions that may now be in place.
Additionally, they can help you find the best mortgage rate and terms for your individual needs, ensuring that you get a deal that fits your needs.
Finally, they can provide invaluable advice and guidance throughout the process, offering their expertise on the current market and helping ensure you get the best possible result.
In conclusion, what impact the ban will have on the Canadian real estate market is yet to be seen. The expectations are that it will lead to a decrease in demand for housing which will cause real estate prices to stabilize. As a result, this will make it easier for Canadians to purchase homes without facing competition from foreign buyers.
If you’re looking to purchase a home in Canada and want to learn more about the foreign home buyers ban and what your options are, contact a trusted mortgage broker in British Columbia. They can provide you with more information and help you find a solution that fits the current legislative landscape.
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