A ban prohibiting foreign buyers from purchasing Canadian real estate comes into effect in January 2023. The Prohibition on the Purchase of Residential Property by Non-Canadians Act was introduced in April of this year.

The purpose of the Act was to help tame soaring home prices, which were (at the time) out of control. Home prices were soaring, and to make homeownership more affordable for Canadians, Prime Minister Justin Trudeau took the step to limit foreigners from purchasing residential properties from January 2023 – for two years.

Fast forward a few months, and times have changed. Affordability reached its worst-ever levels in certain parts of Canada in September 2022. The primary factor at play – rising interest rates. Interest rate increases (six in total this year) have wreaked havoc on housing affordability throughout Canada. Although home prices have cooled off substantially, many Canadians still cannot afford a house due to the high interest rates.

Of course, the interest rate hikes are an effort to curb rising inflation, another driving factor for poor housing affordability. With many travel restrictions lifted over the last year, other countries reported a surge of foreign home buyers. The US reported an 8.5% jump in foreign- buyer spending on homes, breaking a three-year run of declining interest.

With the rise of remote work worldwide, moving to another country and purchasing property has become more viable. Of course, foreign property investment is not new – many wealthy folks looking for a second home or investors seeking a diversified portfolio look to invest in countries outside their primary country of residence.

However, Canada certainly has not attracted foreign investors. The government has put tighter and tighter measures in place to try and cool off surging home prices. With the real estate correction underway, there is concern that the new policy prohibiting foreign buyers will place further strain on the market.

Experts are also concerned about the message sent to foreign investors looking to bring capital into the country. “We’re creating an environment where the world is looking at us in not a good light, in terms of a place to bring investment and bring capital,” said Andy Taylor, a Sotheby real estate broker.

During the pandemic, some countries saw an opportunity to attract migrants, especially those with substantial capital. They did so by creating programs that allow foreigners to easily enter their country – especially targeting those people who work remotely. Some countries have taken the opposite stance, Canada being one of those. With the housing market experiencing a downturn, it remains to be seen if barring foreign buyers will prove to be the right decision.