Will the ban on foreign home ownership help?
A ban has been implemented on foreign property buyers in Canada as of 1 January 2023. The Prohibition on the Purchase of Residential Property by Non-Canadians Act was passed in June last year and will remain in place for two years.
The Canadian Mortgage and Housing Corporation (CMHC) confirmed that anyone caught violating the act or assisting anyone else to do so could face fines of up to $10 000. In accordance with the act, the law also empowers the court to order the sale of a property and will not return to the buyer more than what the property was purchased for.
There are some exemptions to this law, such as people with temporary work permits, refugee claimants, and foreign students who meet specific criteria. This new law aims to reduce competition in the housing market and make property ownership more reasonable and affordable for regular Canadians.
The continued increase in home prices over the last few years reached its peak during the COVID-19 pandemic, forcing the government to take action. Lower interest rates and higher gross incomes caused a boom in property investment. At the same time, the price of rents also skyrocketed across the country, leaving many Canadians struggling to become homeowners and, worse yet, struggling to cover their monthly rental costs.
Thomas Davidoff, Director for Urban Economics and Real Estate at the University of British Columbia, feels the new law will have a minimal impact where it matters most, such as in Toronto and Vancouver, the two largest and most expensive real estate markets, claiming that increased provincial taxes have already clamped down on foreign home purchases there. He did, however, concede that the new law could have a more significant impact on other cities which do not impose high taxes on foreign real estate investments.
According to 2020 statistics, foreigners account for less than 5% of home ownership in Ontario, British Columbia, Toronto, and Vancouver. Some real estate commentators have slammed the government’s decision to ban foreign home ownership, stating that there are easy loopholes around it,
