When an American couple from Texas approached Bettianne Hedges about buying a home in Stratford, Ont., they weren’t looking for the typical Canadian cottage experience.

They wanted a place where their scattered family could gather, take in a show at the Stratford Festival and enjoy the city’s cultural offerings. But Canada’s foreign buyer ban stood in their way.

Hedges, a broker with Sotheby’s International Realty Canada, had been optimistic that the ban would expire on Jan. 1, 2027. Instead, the federal government is proposing to extend the restrictions while allowing foreign buyers to purchase newly built homes.

For Stratford, where American theatre lovers have traditionally gravitated toward character homes in walkable neighbourhoods, Hedges doesn’t expect the exemption to make much difference.

“They also usually want a character home. We’re kind of known for our character homes here in Stratford, so that’s always been the appeal,” she said in an interview.

The proposed changes, outlined last Thursday in the 2026 federal budget, would extend the ban on foreign purchases of existing residential properties until Jan. 1, 2029, while exempting newly built homes. The government says the approach would preserve existing housing for Canadians while encouraging investment in new construction.

But economists and real estate professionals question whether the exemption will generate enough demand to meaningfully affect Canada’s struggling housing market.

 

‘Marginal at best’

 

Benjamin Tal, deputy chief economist at CIBC World Markets Inc., says the original ban, introduced in January 2023, had a relatively limited impact nationally.

“From a macro perspective the impact was marginal, foreign buyers accounted for about five per cent of transactions. But it was more significant in specific centres such as Vancouver,” Tal wrote to REM in email.

He supports the proposed distinction between new and existing housing, although he doesn’t anticipate a major market shift.

“It is reasonable to exempt newly built homes, the impact will be marginal at best,” he says.

Asked whether the exemption could encourage developers to launch projects or help sell existing inventory, Tal says: “I doubt it will be big enough to trigger a big surge, but it would help at the margin.”

He also expects little upward pressure on home prices nationally.

“From a macro perspective the impact on price will be minimal. In places like Vancouver it would be more significant but given the volume of unsold condos in the city any impact on prices will be very slow.”

Mitch Strohminger, director of market analytics at CoStar Group, believes the government is attempting to direct foreign investment toward the higher end of the housing market, where developers have struggled to find buyers.

“The upper tier has been under pressure because units built were priced beyond the reach of many domestic buyers and renters due to rapidly rising construction costs,” he told REM.

He suggests maintaining restrictions on existing homes is intended to limit competition in more affordable segments.

 

Provincial taxes remain a barrier

 

In Vancouver, Dan Scarrow of Macdonald Realty is skeptical the federal exemption will revive foreign investment without changes to provincial and municipal tax policies.

“As long as that 20 per cent foreign buyer tax remains on there, the three per cent spec and vacancy tax, the empty homes tax in Vancouver, the flipping tax here in B.C., it’s not going to move the needle,” he says.

Scarrow, whose brokerage operated a Shanghai office from approximately 2014 to 2021, says foreign buyer activity cooled considerably as additional taxes and restrictions were introduced.

He believes the provincial foreign buyer tax would need to fall to around 10 per cent, alongside changes to vacancy-related taxes, before significant demand returned.

“I don’t think either of those things are going to happen,” he said.

Even at the height of foreign buying activity, Scarrow estimates international purchasers accounted for only a small fraction of Vancouver’s presale market. Still, he acknowledges that additional buyers could help some developers meet the sales thresholds needed to move projects forward.

“That could be a marginal difference for some projects that need to push their pre-sale requirements over a certain line.”

For Scarrow, the larger issue is whether Canada can attract enough investment to support new construction.

“The least livable home is a home that never gets built,” he says.

 

A different kind of cottage country

 

Back in Stratford, Hedges believes the proposed exemption overlooks towns and cities where international buyers have sought second homes outside of the traditional rural cottage communuties.

She says American owners have contributed to the local cultural economy, sometimes purchasing properties with secondary suites that can accommodate theatre workers.

She also questions whether restricting those buyers has meaningfully improved local affordability.

“I don’t think it’s had any impact at all,” she says.

Instead, she believes the restrictions have reduced opportunities for spending on local arts and cultural activities.

“Absolutely, those same people may come to visit, but being here for an extended time, there would have been more money that flowed into that sector.”

For Hedges, the issue is that a policy designed around broad housing-market conditions doesn’t necessarily reflect the needs and opportunities of individual communities.

“It’s underestimating what our Canadian and even Ontario cities have to offer to an international buyer.”