As of January 1st, 2023, a two-year ban on non-residents buying homes in Canada has come into effect. This measure, which was announced as part of the federal government's April budget, aims to improve housing affordability for Canadians.
The ban contains exemptions for certain groups of non-residents, including Canadian citizens and permanent residents, certain international students and foreign workers, and refugees. Non-Canadian entities will also be banned from buying property.
If a non-resident buyer breaches the ban, they can be fined up to $10,000 and courts will have the power to order that the property be sold. Additionally, anyone who knowingly helps them do so can also be convicted and fined up to $10,000.
The Canadian Real Estate Association has expressed concern that realtors may face extra costs while trying to assess a buyer's eligibility. As a result, realtors are likely to require additional documentation from all prospective buyers to avoid contravening the ban.
In 2016, British Columbia implemented a foreign buyer’s tax – a similar measure to discourage foreign ownership. Nathanael Lauster, a UBC Associate Professor of Sociology who researches housing was quoted in a recent Global News article: “I don’t really think (the federal prohibition) is likely to have an effect across other parts of Canada, given how little effect we’ve seen out here in B.C.” Ontario implemented, and more recently increased, a similar punitive foreign buyer’s tax which was also met with significant skepticism regarding its lack of direct impact.
Brynn Lackie, a columnist from the Toronto Sun, argues that the recent two-year ban on foreign buyers in Canada is unlikely to have a significant impact on the housing market and may be more of a symbolic gesture. They point out that there are numerous exemptions to the ban, and that it is unclear how effective it will be in addressing the real issues impacting Canadians' ability to afford housing.
Konfidis Analysis: Current State of Foreign Ownership
National data on current foreign ownership lags and is incomplete, however we can conclude from Statistics Canada’s latest release in this regard that residential property foreign ownership is a minor factor among the larger provinces. Herein, we can observe the Residency Status (defined below) in 2020 (the last year available) at only 3.0% in Ontario, and 4.1% in British Columbia. This data includes both individuals and non-individuals (corporations, trusts, etc).
Prior year data also indicates that instead of increasing year-over-year, the trend of foreign ownership decreased in all provinces reporting from 2019:
This ban will not have an appreciable effect on demand for homes in Canada. The carve-outs for many groups will mean many “foreign buyers” will continue to legitimately purchase homes. Moreover, the experience in British Columbia and Ontario should be taken as an indicator of the limited impact we should expect this to have on sales volume or prices.
As Konfidis has published before, top-line population growth, fueled by immigration is a far more dominant factor driving sustained demand. Supply in the form of permits and construction starts, variously restricted by policy and regulation is lagging.
Ban notwithstanding, Konfidis continues to see a very compelling landscape for single-family rental ownership driven by supply-and-demand fundamentals.
Sources: CREA’s update on the ban can be found here [https://news2me.crea.ca/2022/december-2022/federal-government-releases-regulations-on-prohibition-on-the-purchase-of-residential-property-by-non-canadians-act/]. The Global News article on this subject is available here [https://globalnews.ca/news/9386999/foreign-homebuyers-ban-housing-market-canada/]. Brynn Lackie’s column is available here [https://torontosun.com/opinion/columnists/lackie-foreign-buyer-ban-a-big-nothingburger]. Statistics Canada’s release on residential property ownership is available here [https://www150.statcan.gc.ca/t1/tbl1/en/tv.action?pid=4610003001].
* Statistics Canada defines Residency Status as follows: The residency status of the owner is assigned based on whether the owner is an individual or a non-individual. An individual is considered a resident if his or her primary dwelling is in the economic territory of Canada. Conversely, an individual is considered a non-resident if his or her primary dwelling is outside the economic territory of Canada.
Non-individuals are considered residents if they engage in economic activities from a location in the economic territory of Canada. Conversely, non-individuals are considered non-residents if they do not engage in economic activities from a location in the economic territory of Canada.