It still might not be widely known, even amongst Canadian realtors, but Canada’s two-year ban on foreign investors purchasing residential property comes into effect on Jan. 1, 2023.
The Parliament of Canada passed legislation – the Prohibition on the Purchase of Residential Property by Non-Canadians Act on June 23, 2022 – and Canada Mortgage and Housing Corporation says, “it’s anticipated that this will help reduce foreign money coming into Canada to buy residential real estate.”
But Elton Ash, executive vice-president, Re/Max Canada, believes the vast majority of people are still not aware of this.
“I brought it up (recently) at our internal… regional development group…and they all looked at me like, ‘what are you talking about?’,” says Ash.
“I believe, as the Canadian Real Estate Association believes, it’s going to be a similar experience to what happened in British Columbia when the foreign buyer’s tax was implemented in 2016 and then the speculation and vacancy tax was introduced in 2018. It really had a negligible effect.”
Ash said foreign owners just swallowed the cost at the time, and in the end, those measures had no effect on curbing foreign ownership. He said research indicated that it was around 2 to 3 per cent of the total market for Vancouver.
“It seemed draconian to bring in this tax when it was such a small part of the market,” added Ash. “Now we look at it coming across Canada.
“I think there’s a bigger issue with the reputation of Canada accepting immigrants, accepting people coming into this country and especially when a lot of our immigration policy is tied to wealth. The wealthier an immigrant is, the easier it is to get into the country . . . part of that is buying a home. Now the way that the act has been passed, it’s a prohibition. This isn’t a tax. It’s a prohibition on buying property in Canada.
“So I think it does more damage to Canada’s reputation as a welcoming country around the world than anything else.”
Phil Soper, president and CEO, Royal LePage, said there has been a long tradition in Canadian politics at both the provincial and federal levels of looking to foreign investors as a problem for housing in this country.
“It’s mostly unfounded,” said Soper, adding that research has indicated that the number of transactions involving foreign buyers who didn’t intend to live in a Canadian property was minimal and never enough to move the needle on affordability.
“But it’s an easy target. It’s easy to point to foreigners and say they’re the challenge and then put into place legislation, whether it’s taxes or a more draconian outright ban and say that’s the problem and we’re taking action,” Soper added. “It’s much harder to address the real problem, which is a grave shortage of housing in this country, and get municipalities working with provinces working with the federal government to fix that problem. That’s a big complex challenge on the same scale as working to improve our health care system.
“Putting a ban or a tax on foreigners, most of whom have very limited voice in Canadian politics, is an easy target.”
Soper said it’s also worth noting that legislation was enacted at a time when markets were exploding, and inventory levels were at all-time lows.
“The good news about this legislation is that it’s not permanent, which would have been really problematic, and probably encouraged challenges under free trade agreements as unlawful. So a two-year ban, a temporary ban, it will go quickly. It may not be worth the effort for someone who feels that Canada is breaking trade law,” he said.
“The second thing that makes it less concerning for me in practical terms is that it doesn’t include recreational property. Canadians are the largest buyers of recreational property in the United States, for example. They’re also significant investors in places like Latin America. They like to own recreational property, and it would have been unconscionable if we banned Americans from buying a cabin or a cottage in Canada when we wanted to buy exactly the same thing in Arizona or Florida. So they were smart enough to carve that out and not include that as part of the ban.”
Linda Kristal, vice-president of advocacy, CREA, said the association has reached out to realtors to inform them of the changes and worked with provincial associations to make sure they are aware of the legislation.
“First and foremost, for a long time, we’ve been arguing that the federal government needs to get serious about supply. Focus on supply. And measures that tinker around the margins are beside the point when we’re looking at the number of units that are short currently in this country. You know, roofs over heads,” Kristal said.
“Also, members have expressed concerns, and we’re concerned; Canada is certainly a country that has built its reputation on being open to the world, welcoming the world, and this is certainly going to put that reputation into question.”
Mario Toneguzzi is a contributing writer for REM. He has more than 40 years of experience as a daily newspaper writer, columnist, and editor. He worked for 35 years at the Calgary Herald, covering sports, crime, politics, health, faith, city and breaking news, and business. He now works on his own as a freelance writer for several national publications and consultant in communications and media relations/training. Mario was named in 2021 as one of the Top 10 Business Journalists in the World by PR News – the only Canadian to make the list.
“it’s anticipated that this will help reduce foreign money coming into Canada to buy residential real estate. “instead of this they should boost construction industry
Phil Soper of Royal LePage is bang on regarding municipalities needing to address supply. The missing middle of duplexes, triplexes and quads in EXISTING neighbourhoods legislated “by right” would effectively address a meaningful proportion of demand and give opportunity to the small investor needed for sustainable neighbourhoods. Readers may be wise to cast their votes in upcoming municipal elections accordingly!
Refusing foreign money to come into Canada to buy residential Real Estate is a big mistake, in my opinion. It looks like the government rather get people with no money and tax the Canadians to support those in need of housing.
Totally agreed
I agree as they increase immigration, but without increasing the housing supply, it’s going to be a nightmare
The focus of this article relates to the red tape and long delays in getting developments under way. Both the federal and provincial governments are under pressure now to move the development projects forward rather than finding reasons to slow them down. I hope this continues to help get Allen Side Rd and Rossmore Rd projects moving rather than stalled.
More effectively would be reducing the land transfer tax for seniors. Imagine if someone wanted to trade down in Toronto from their family home into something more manageable or close to their familiar neighborhood. They likely can’t or won’t because they have to pay the double land transfer keeping their family home unavailable for a trade up buyers looking for more space to expand their family which in turn prevents that smaller home or condo from being available to a first-time buyer. Banning foreign investment will do nothing but reduce the amount of rental units which they tend to supply to the market and our government has failed to supply. Someone please tell me when and where a tax on something helped, yet that is always the only solution offered. Election is coming, lets elect them all again, maybe this time we will get the hope and change they keep promising. Just typing that statement made me laugh.
I expect this Act is too little, too late. Between 2014 and 2019, in the small BC community where I live, large development properties were purchased by a conglomerate of coordinated, very wealthy foreign investors who are now in the process of marketing their proposed subdivisions overseas. I keep hearing the narrative that foreign buyers had a negligible effect on BC’s housing prices, however, in a small community it is far easier to see that is entirely untrue. In 2015, I wrote a BC Chamber policy calling on the government to track, analyze and report foreign buyer data so that we no longer had to rely on anecdotal evidence. Still waiting for that data…
We have the same issue in the Okanagan. Foreign buyers purchasing homes in residential neighbourhoods then putting the home up on Air BnB. Homeowners in these residential neighbourhoods are reporting noise violations to their City Hall & the Buyers who wanted to make the property their home, lost out to a Foreign Buyer using our residential housing as a Mutual Fund.
Thank-you for your observations
They now track foreign buyer data since 2018. Why do you think they don’t announce those data? Maybe because it would make their Foreign buyer’s tax seem silly?
I really do not understand why no one is saying anything about assignment clauses. Builders in Edmonton and Calgary are very strict when it comes to buying a house with the sole purpose of selling it before closing. This is not the case in Ontario and no matter the supply of housing, these investors would exhaust the supply and sell at higher prices. Surprisingly, Builders and developers are now putting premiums on assignments.
Can someone please clarify if the Jan 01 2023 deadline day is for Offer day or Closing day?
What happens when someone is transferred to Canada and can’t find rental accommodation that suits them? They can’t buy? Example: professional athletes.
Without foreign investment there is going to be an even bigger shortage of rental properties from those investors
“The second thing that makes it less concerning for me in practical terms is that it doesn’t include recreational property. Canadians are the largest buyers of recreational property in the United States, for example.
What is the definition of a Recreational Property?? For use with this loophole
Switzerland Denmark and New Zealand have similar laws, some dating back to the 1960s. They prioritise local buyers with no adverse effect on the economy. Contrast with the hollowing out of central London U.K. where whole neighbourhoods stand empty, owned by overseas speculators. Well done to Canada on taking this measure.
I will repeat Rosemarie Wallace ‘s question about-how do we define a recreational property?
As soon as the GOVERNMENT starts ruling and “running” businesses, regardless which kind, things go sideways.
The number of foreign buyers residential transactions is not significant enough to worry about. However, this policy damages the Canadian reputation for welcoming the immigrants and put it into question. It is just to divert attention from current financial policies by the all levels of the governments in Canada. I am glad that it just for two years. I can predict it will be scrapped after the two years just to get more votes in the next election.