The Canadian government has partially walked back its ban on foreign property buyers. What does that mean for the rental market?
The Prohibition on the Purchase of Residential Property by Non-Canadians Act has been amended to allow some foreign buyers to purchase residential property under certain circumstances.
When the law came into force in January, the only exemptions were for international students who have been in Canada for most of the last five years, as well as refugee claimants and temporary residents who have filed taxes in Canada for at least three years.
One effect of relaxing the ‘ban’ will be to reduce demand for rental properties. Work permit holders and others authorized to work in Canada will be allowed to buy a home if their permit has at least 183 days of validity left. Immigration has driven demand for rental properties in major cities, and that demand could fall if work permit holders buy instead.
But they could also allow for more housebuilding. Non-Canadians will now be allowed to buy residential property for the purposes of housing development, as well as vacant land zoned for residential or mixed use.
The bar for considering a company to be foreign-controlled (and therefore subject to the foreign buyers ban) will also rise. Companies will be deemed foreign-controlled if non-Canadians own at least 10% of its equity – up from 3% before. The Canadian Home Builders’ Association had previously warned that such a low bar would prevent developers from building much-needed homes.
Although developers will have more freedom to buy housing and land, smaller non-Canadian investors are still restricted. Work permit holders can now buy residential property again, but will be limited to just one. Buying and renovating a property to rent out also would not count as housing development unless it is “so extensive that it is tantamount to the construction of a new building or a change of use”.
Other legal headlines
CRA grants reprieve for late filing of underused housing tax return – Financial Post
Hamilton surveying public about renoviction issues – The Hammer