In an effort to cool down the Canadian housing market and make it more affordable for Canadians, the federal government has implemented a new policy aimed at restricting foreign buyers from purchasing real estate in the country. In this blog, we will discuss what the foreign buyer ban is, how it works, and what impact it may have on the Canadian housing market.
What is the Foreign Buyer Ban?
The Foreign Buyer Ban is a new policy introduced by the Canadian government that restricts non-residents from purchasing residential real estate in Canada for a period of at least two years. The policy came into effect starting January 1, 2023, as part of the federal government’s effort to make housing more affordable for Canadians.
How does the Foreign Buyer Ban work?
The Foreign Buyer Ban or the Prohibition on the Purchase of Residential Property by Non-Canadians Act prevents non-Canadians from buying or indirectly buying residential property in Canada for 2 years and carries a hefty fine of $10,000 CAD. But it also has other criteria:
- Entering a binding offer to purchase a residential property before the policy date means you can still purchase the home. If the actual sale is finalized passed the policy date of January 1, 2023, you can still purchase that home. The act applies to purchase offers that have concluded after January 1st.
- This law doesn’t ban the purchase of larger buildings with multiple units and defines a residential property as a building with 3 homes or fewer.
To be exempt from this new act as a non-Canadian you must show that you:
- Have a work or study permit via Immigration, Refugees, and Citizenship Canada and have verification of status issued as well. You must show that you have filed income tax returns and have worked for 3 of the 4 years before the year in which the house purchase was made.
- Documents that show that you have lived in Canada for a length of time. These documents include records of travel, rental agreements, etc.
There are some stipulations about who can actually purchase a home and how this act defines a “foreign buyer”. This act also applies to privately held corporations and entities controlled by non-Canadians as a way to protect housing prices.
What impact will the Foreign Buyer Ban have on the Canadian housing market?
The impact of the Foreign Buyer Ban on the Canadian housing market remains to be seen. On one hand, the ban may help to make housing more affordable for Canadians by reducing competition from foreign buyers. This could lead to a decrease in housing prices, making it easier for first-time homebuyers to enter the market.
On the other hand, the ban could also have unintended consequences. For example, it may discourage foreign investment in the Canadian housing market, which could have a negative impact on the economy. Additionally, the ban may not have a significant impact on housing prices if the majority of buyers are already Canadian residents.
Major cities in Ontario were subjected to a Non-Resident Speculation Tax, including Ottawa. This taxation applied to purchases of residential property located anywhere in Ontario by individuals who are foreign nationals, or by foreign corporations.
While Ontario cities like Toronto and Ottawa were ripe for foreign investment, these policies aim to make housing more affordable to the detriment of foreign investment.
While the true impact of the ban on the housing market remains to be seen, it is one of several policies aimed at making housing more affordable for Canadians. It is important for prospective buyers to be aware of these policies and how they may affect their ability to purchase a home.
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