As of New Year’s Day, some foreign buyers will be barred from buying residential property in Canada in a move the federal government says aims to make housing more affordable.
However, many real estate and housing policy experts are not convinced that the two-year ban will have a significant impact on housing prices.
Brendon Ogmundson, chief economist at the British Columbia Real Estate Association, said: “I think it’s a very political policy rather than an economic one.
“Many people believe that it is foreign investors and foreign money, rather than the actual factors of low interest rates and very low supply, that have pushed home prices higher in recent years.”
There is limited data tracking foreign buyers and owners across Canada. In 4 provinces and 1 territory measured by the Canadian Housing Statistics Program in 2020 — latest year available — 2-6% of residential properties have at least one non-resident owner.
In British Columbia’s spotlight housing market, only about 1.1% of transactions in 2021 involved foreign buyers. In 2017 he was down from 3%. This is attributed to state government taxes on non-residents, speculators and vacant homes. The Ontario government has said there has been a “declining trend” in the number of foreigners buying property since it introduced a tax on non-resident purchases in 2017.
“Despite the variability in the data, it shows that the proportion of foreign buyers is actually quite small,” said Vic Singh, an assistant professor in the Global Management Studies Program at Toronto Metropolitan University’s Ted Rogers School of Management. ‘ said.
“I think the government had to do something [about housing]This makes it easier to target foreign buyers. ”
Finance Minister Chrystia Freeland declined multiple requests for an interview. It should not be an investment property of
According to information provided to CBC News by the Canada Mortgage and Housing Corporation, the government has not conducted modeling that could show the potential impact of the ban on housing markets and prices.
who and what are exempt
Canadian citizens and permanent residents are exempt from this ban. Other prospects face a variety of different rules.
International students and foreign workers may purchase a single property only if they have lived in Canada for at least a certain number of years and intend to obtain permanent residency.
For workers, this meant working in Canada for three of the four years prior to purchasing the property, while students were required to stay in Canada 244 days each year for the five years prior to purchase. International students may not purchase property valued at more than $500,000.
Temporary aliens residing in Canada, refugees, diplomats, consular officials, and members of international organizations may also purchase property without additional restrictions.
The ban prohibits non-Canadian companies, including foreign companies and foreign-controlled Canadian companies, from buying real estate.
This rule applies only to homes with three or fewer dwelling units.there is also Exceptions for Residential Real Estate in Sparsely Populated AreasRecreational facilities such as cottages, cabins and other vacation homes are exempt.
Non-residents who buy homes in violation of the ban, or real estate agents or lawyers assisting them, can face convictions and fines of up to $10,000. The federal government can also apply to a superior court in the state where the home was purchased for an order to sell the property.
The Canadian Real Estate Association (CREA) was concerned about the additional costs and potential legal risks realtors might face when trying to determine the eligibility of a property with a buyer.
“As a result of this law, buyers can expect realtors to ask more questions and require additional documentation from all clients,” a CREA spokesperson said in a statement.
Warning from New Zealand
Freeland’s office pointed to New Zealand’s ban on foreign buyers as an example of “peer countries” implementing similar policies to improve housing affordability.
But experts there say it is far from successful.
Prior to New Zealand’s 2018 ban, 2.9% of homebuyers were non-residents.Later that number he dropped to 0.4% but still house prices continued to soaronly tempered by rate hikes this year.
Brad Olsen, principal economist and director of economic consultancy Infometrics in Wellington, New Zealand, said: .
“It was a really political move, given that the foreign-owned sale was actually very small.”
Olsen was concerned that Canada was making exactly the same move.
“It’s the sound of a real big political focus that makes a big ripple and gets everybody very excited, just like in New Zealand…we proposed at the time [of New Zealand’s ban] Nothing will change, nothing will change
Experts say increasing supply by building more homes sooner is one obvious solution to help meet housing demand, with the federal government encouraging local governments to accelerate construction. We are committed to helping you do that.
But the type of home being built is also important, Singh says. “If we build 1.5 million homes and they are not affordable, it will only lead investors to scoop up more supply.”
The government is also introducing a new anti-reversal tax for investors from January 1st. Buy or sell a home within 12 months.
Experts told CBC News that there are many other measures the federal government is yet to consider. For example, expanding the tax on foreign buyers to new territories, such as BC and Ontario, or broadening its scope. Vacant house tax Beyond non-residents.
Paul Kershaw, associate professor of public policy at the University of British Columbia and his think tank Generation Squeeze, “Modest” Surcharge For a home worth $1 million or more, most owners will pay between $400 and $1,000 when the home is sold or inherited.
Kershaw said that small amount would translate into billions of dollars in annual revenues that the federal government could invest in affordable rental housing and co-operative housing units, as well as rebates to renters.
“We have to rebalance and say there is a principle here: housing is housing first and investment is second,” he said.
Kershaw isn’t as cynical about the foreign-buyer ban as other experts, but he expects it to be a “silver buckshot” at best, not a silver bullet for housing affordability. .
“It’s one (probably modest) tool in your toolbox, but there are many others you may need.”