Canada’s ban on foreign homebuyers came into effect on January 1, 2023, essentially stopping all non-Canadian individuals and commercial enterprises from buying residential properties as investments.
While initially only meant to last for two years, the federal government made the decision to extend the ban by another two years in February 2024. The ban will now last until January 1, 2027. This move aims to help cool the housing markets after prices spiked during the pandemic.
In February 2022, prices hit a national peak of $816,720, and competition within the Canadian housing market reached new heights. Homes were receiving multiple offers, and buyers were forced to accept purchase agreements with fewer terms and conditions, causing them to assume more than the usual risk.
While the average price of homes has since dropped, finding affordable housing continues to be an issue for many Canadians.
“The desirability of Canadian homes is attracting profiteers, wealthy corporations, and foreign investors,” said Trudeau's Liberal Party on its campaign platform. “This is leading to a real problem of underused and vacant housing, rampant speculation, and skyrocketing prices.”
The Canada Mortgage and Housing Corporation (CMHC) states that the new ban’s goal is to “make homes more affordable” for those who live in Canada.
Now that these regulations are in effect, let’s take a closer look at what they entail and what they mean for Canadian homebuyers and investors.
What is included in the Ban?
The Prohibition on the Purchase of Residential Property by Non-Canadians Act specifically bans foreign buyers from purchasing residential properties, including detached houses, semi-detached homes, row houses, condo units, and other similar homes. Non-Canadians will still be able to rent a home.
The legislation applies to properties situated in a census metropolitan area or a census agglomeration. A census metropolitan area is home to at least 100,000 people, with no fewer than 50,000 living in its core, while a census agglomeration is an area whose core population reaches at least 10,000 people.
Within the regulations, a non-Canadian is defined as someone who is not a citizen, a permanent resident, someone registered under the Indian Act, or a corporation located in Canada that is privately held, not listed on a Canadian stock exchange, and controlled by someone who is a non-Canadian.
Is Anyone Exempt From the Ban?
The CMHC announced that the foreign buyer ban allows some exceptions for refugees, temporary residents, and international students under very specific circumstances.
International students must have filed income tax returns in Canada during the preceding five years, have lived in Canada for at least 244 days of each of the five years, and have not previously bought a home while the ban was in effect. They are also not allowed to purchase a property for over $500,000, a very limiting factor considering today’s prices.
Temporary residents must have a valid work permit or authorization with at least 183 days of validity left on it. Like students, they must not have already purchased a home while the ban was in effect.
Refugees provided protection are another group who are exempt. They can also be refugee claimants or individuals fleeing international crises who have made an official claim for refugee protection or have received temporary resident status.
Additionally, the legislation does not apply to situations where one acquires property through death, gifting, divorce, or separation. It is also not applicable in cases when the acquisition of a property is the outcome of exercising a security interest or secured right by a secured creditor.
Real estate in municipalities that have a core population of fewer than 10,000 are not subjected to the new regulations. Further, the law does not ban the foreign purchase of larger buildings with several units, cottages, or lake houses.
What Will Happen if You Break the Rules?
The ban has introduced a $10,000 fine for non-Canadians who choose to defy the new law and anyone who willingly helps them. Moreover, a court may order the property to be sold and will only return the price paid to purchase the home to the buyer.
What Does This Mean for Canadians?
By limiting foreign investment into residential real estate, the ban is expected to create new opportunities and a less competitive market for Canadians by providing better access to supply.
As conditions for domestic buyers continue to improve, now is the best time to purchase real estate. Fewer buyers means a cooler market where buyers can take their time, make informed decisions, and ultimately choose the best property for their needs.
To learn more about how this new law and many other competing factors are affecting today’s real estate market, click on the link below.