Canada Extends Ban on Foreign Buyers of Residential Properties to 2027
The Canadian government has announced an extension of the ban on foreign nationals and companies buying residential properties in Canada for an additional two years, taking it through 2027. This decision is part of a series of measures aimed at tackling housing affordability concerns that have been a significant issue for the governing Liberals. Chrystia FreelaBank of Montreal chief economist Douglas Porter noted that these sectors are heavily influenced by exports, indicating that the strength of the U.S. economy is having a positive spillover effect on certain Canadian sectors.
Both non-durable and durable goods manufacturing played a significant role in the monthly GDP growth, while wholesale trade rebounded by 0.7% following two months of declines. A preliminary estimate of 0.3% growth in December suggests that GDP may have expanded by 0.3% in the fourth quarter, potentially resulting in a 1.5% economic growth rate for 2023, according to the statistics agency.
BMO’s Porter suggested that if December’s estimate is accurate, the momentum going into 2024 could exceed expectations, potentially reducing the urgency for the Bank of Canada to implement interest rate cuts. nd, the federal finance minister, made the announcement to address the ongoing challenges in the housing market.Foreign Buyer Ban Overview:
The foreign buyer ban was initially implemented last year and was set to expire at the start of 2025. Under this ban, foreign commercial entities and individuals who are not Canadian citizens or permanent residents are prohibited from purchasing residential properties in Canada. However, some exceptions exist, including temporary work permit holders, refugee claimants, and international students who meet specific criteria.
Non-Canadian buyers found in violation of this ban can face fines of up to $10,000 and may be ordered to sell the purchased property.
Government’s Intent:
Chrystia Freeland emphasized that extending the foreign buyer ban aims to ensure that houses are primarily used as homes for Canadian families and do not become speculative financial assets. The government is committed to leveraging all available tools to enhance housing affordability across the country.
Reason for Extension:
The federal government extended the program by two years because it recognizes that Canada’s housing challenges will not be resolved by the end of 2024. They intend to closely monitor how the real estate market evolves. Data related to this ban remains largely preliminary, even from private-sector sources, due to its relatively short implementation period.
Statistics and Expert Opinion: Statistics Canada data from 2020 revealed that seven percent of British Columbia’s condominium supply was owned by non-residents for investment purposes, with a similar figure of 5.6 percent in Ontario. These investment properties were concentrated in the downtown areas of Vancouver and Toronto.
Tom Davidoff, an associate professor at the University of British Columbia’s Sauder School of Business, questioned the ban’s potential impact on overall housing affordability. He noted that other measures, such as empty homes taxes and provincial foreign buyer taxes, have already curtailed foreign buying significantly in British Columbia and Ontario.
Government’s Perspective:
The government maintains that the foreign homeowner ban is not intended as a sole solution to the complex issue of housing affordability. Instead, it is considered one tool among many in a comprehensive approach to addressing Canada’s housing challenges. The government has also recently introduced measures to increase the availability of homes for Canadian residents, including the removal of the GST on new purposebuilt rentals and substantial investments in housing initiatives at the municipal level.