Just over a month has passed since Canada enacted its foreign buyer ban in an effort to cool persistently high, though off-peak house prices.
Is it working as intended?
The Prohibition on the Purchase of Residential Property by Non-Canadians Act
The Act became effective on January 1, 2023 and prohibits anyone who is not a citizen or permanent resident of Canada from purchasing residential property with three or fewer dwelling units (e.g. single-family detached and semi-detached homes, townhouses, condos) for the next two years.
There are limited exemptions, including international students who have lived in Canada for most of the last five years, temporary residents who have filed taxes in Canada for at least three years, and refugee claimants.
The ban was passed in June 2022, shortly after the national average home price topped $800,000 in February. In December, the average home cost $626,318 – a substantial dip, but at 21% higher than pre-pandemic levels, it still leaves homeownership out of reach for many households.
Given that house prices have already come down from their peak and provincial non-resident homeownership rates are very low, ranging from 2 to 6%, some Canadian real estate experts are saying the federal government may be scapegoating foreign buyers for the country’s housing affordability crisis.
Rental market effects
Judging the impact of the foreign buyer ban will take time. For now, property managers would be wise to prepare for a more competitive rental market as prospective buyers’ ambitions are frustrated.
To begin with, Canadian renters who were unable to enter the house market might now be able to do so due to plummeting demand from foreign buyers, while non-Canadians may be forced to take their place in the rental market and renew their leases instead. Adding to the influx of new tenants, the 500,000 newcomers Canada plans to take in this year will create more new demand for rental properties, putting pressure on supply of rental stock.
To effectively navigate the new legislation, real estate agents and property managers should seek legal counsel or contact Canadian real estate associations for guidance.