Here's how Canada's two-year ban on foreign home buyers affects your real estate purchasing power: What you need to know
Housing prices have risen meteorically over the last two years, and it is clear that a number of factors are affecting this – particularly foreign home ownership and real estate flipping. For many individuals, home ownership is a dream that is out of reach, especially with prices escalating upwards of 20% on average over 2021 alone.
In an attempt to curb these factors, the Canadian government recently announced a two-year ban on foreign home buying – including condos, apartments, and single residential units – as well as higher taxes for people who sell their home within a year. This means that for two years, foreign investors will be unable to purchase real estate in Canada. However, both measures include multiple exceptions including exceptions for permanent residents, foreign workers and foreign students, as well as foreigners buying their primary residence in Canada.
Which group is this measure designed to impact? The two-year ban on foreign home ownership in Canada is supposed to impact foreign home investors who don’t ever plan to live in Canada, leaving empty houses, squeezing the available inventory and driving up real estate prices for Canadians. It is estimated that up to 10% of homes in Toronto alone are vacant, so this could be significant.
Will this two-year “bandaid” have any impact in reducing the housing bubble? With Statistics Canada quoting that foreign home ownership in Toronto and Vancouver is a mere 2%, many experts say that the key issue is actually in inventory – there’s simply not enough houses available to buy.
Will these new measures cool down the Canadian real estate market? It is unlikely that these measures will send housing prices plummeting permanently. For one thing, foreign investors who are able to afford Canadian real estate investment are likely to see higher taxes as an additional “cost of doing business”, a minor hurdle which won’t really hurt them. Furthermore, this legislation is prone to loophole exploitation.
However, these measures could provide some temporary relief – particularly in conjunction with other measures proposed by the government to cool the market, such as making blind bidding optional. Perhaps this may be a good time for prospective home buyers to make a move.
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