Liberal Government’s 2021 Federal Budget to Include 2-Year Foreign Home buyer Ban

Published April 11, 2022 by Real Estate Leads

It had long been expected that the new Federal budget was going to include some type of ban on foreign ownership as the current Government works to find ways to address a very real problem that needs addressing – the overheated nature of the Canadian housing market and homes that are becomingly increasingly unavoidable for the vast majority of the population in Canada. The population outside Canada? Well that’s an entirely different story as the current prices of homes here are affordable for a great many of them and there’s all sorts of reason why that is.

We won’t get into that here, but we will concur that foreign ownership is a part of the problem as to why homes cost too much for average Canadians. It certainly does factor into the supply end of the equation, and homes purchased for more than they are worth if fueling price appreciations in a very negative way for people who have yet to get into the real estate market. The challenge for these people is very real, as is the entirely different type of challenge for those who work with both home buyers and those selling homes – realtors like you who’ll be reading this.

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But back to our topic for this week; what more can we know about the 2-year foreign buyer’s ban for Real Estate in Canada?

Paired with Explosive Population Growth

This ban will be helpful in cooling the market, but the question is to what extent will it be helpful? Experts tend to think it will only be marginally beneficial, as so much of the forces pushing demand to WAY outstrip supply is based around 2 facts:

  • Population growth in Canada and inbound immigration is far beyond what the rate of new home building can even be close to keeping pace with. Some 400, 000 new Canadians are expected to arrive just this year alone, and most will be seeking housing in the same metro areas where the housing crisis is most acute as it is.
  • There is a massive shortage in skilled trades that make new home builds difficult to commence, even if the will to build them and funding is in place. Homes need to be quality built, and that takes a certain developer with the right people building the homes to be able to do that.

One thing that is true is that certain bidding processes and new realities around real estate sales favour investors, and as we all know many of those investing in Canadian real estate live outside of the country. To be fair, there’s nothing wrong with that provided the market is health and not skewed one way or the other. But that is not the case in Canada, and that’s why we agree that this 2-year ban on foreign buyers is a good move, although we also agree it will likely make little difference in the big picture.

Primary Residence and Other Exemptions

The Government has explained that permanent residents, foreign students, and TFWs (temporary foreign workers) will be exempted from the ban. But what is most notable about the exemptions is that foreigners who are buying a primary residence – that is, not buying homes as investments with the intention to leave the empty OR rent them out – will not be banned from buying real estate either.

Can we assume that there will be a good amount of homes bought by investors who find one of these individuals to have their name on the deed, or any other of a number of likely loopholes? Absolutely, but this is an issue where progress is probably going to be made incrementally and as such this foreign buyer ban over the next 2 years may help contribute to more normalcy in the housing market. Maybe not as much as hoped, but it will be a positive to at least some extent.

What it does do is allow the Government to appear as if it cares about the everyday Canadian’s ability to afford housing for themselves, and whether or not that’s true it is something that has been expected for some time. Here it is now, and we are already looking forward to 2 years from now when the success of this move can be evaluated.

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