Today, we’ll discuss the upcoming ban in which non-Canadians will be prohibited from buying real estate across Canada for two years commencing January 1st, 2023.
Foreign Buyer Ban begins on January 1st, 2023
At the start of the new year, there will be a freeze on all non-citizens and non-permanent residents purchasing real estate in Canada under the Prohibition on the Purchase of Residential Property by Non-Canadians Act. The idea is to make real estate more affordable for Canadian citizens.
It was one of several initiatives the federal government considered to help cool the market off when real estate prices were soaring at the start of 2022. We’re no longer in the same situation.
The September Zoocasa report shows that from February to July of this year, many places in Ontario were already experiencing drastic price drops. For example, in Kitchener-Waterloo, the average home price dropped by 23%, or $235,937, and in Hamilton-Burlington, by 18%, or $200,152 in those five months. The rate hikes in interest rates have played a major role in cooling off the housing market.
As a country, are we being hypocritical? Canadians buy more property in the U.S. than any other nationality. Places with warm climates, like Mexico, Costa Rica, Ecuador, and Panama, are also seeing an increase in Canadians buying property in their countries. Is it fair to ban people from other countries but not be banned ourselves?
Exceptions to the Foreign Buyer Ban
As with everything, there are exceptions to the foreign buyer ban.
The following are exempt from the Prohibition Act:
- Temporary residents within the meaning of the Immigration and Refugee Protection Act
- Non-Canadians who purchase property with a Canadian spouse
- People registered under the Indian Act
Who Are the Foreign Buyers?
About 3.5% of real estate in Canada is owned by non-residents. They’re typically buying condos as investment properties or vacation homes.
Instead of preventing the sale of real estate to foreign buyers completely, would it make more sense to increase taxes? It would bring more money into our economy and create jobs for people to manage rental properties.
Another idea is to increase taxes on sellers who sell a property within a year.
Go to 6:53 to hear Adrian and Ariel’s thoughts on what those who buy property for the sole purpose of flipping and generating income should pay.
Where are Foreign Buyers Heading?
Canada is known globally as having some of the best real estate in the world. We have a stable economy and good people, and it’s easy to find a reliable property manager.
Most buyers will purchase in the major cities: Vancouver, Toronto, and Montreal. But out east is also becoming popular with retirees, vacation properties, and people who want a more laidback lifestyle. Chances are, you can probably get waterfront property for less than what it would cost for any vacant land in Ontario.
Do you think the Prohibition on the Purchase of Residential Property by Non-Canadians Act will have a profound impact?