There were quite a few articles written about the foreign buyers’ ban on residential property. It is a 2 year program designed to protect real estate price increases due to foreign buyers’ participation. To me, it is a little too late. The addition of the foreign buyer’s tax has already slowed the purchases and the high interest rate has killed the market. Also there are a bunch of exemptions that make it more ineffectual. International students, temporary residents, people with temporary work permits, refugee claimants and someone with a Canadian spouse are all exemptions.
By the time the market turns around, the program would be over. It will be interesting to see if it will be extended. We have enough Canadians and new immigrants to keep real estate prices high. We really don’t need more competition from abroad. Some people say that foreign buyers do not affect the prices of real estate and point to the price jump during the covid period when foreign buyers were kept out of the market. Well, during covid there was a lot of money printed and distributed to people who didn’t need it. It ended up in the stock market and the real estate market. Not just in Canada but in most developed nations that turned on the printing press. Also, by then the FOMO fire has been lit. After decades of real estate positive policies, people are conditioned that real estate will go up forever. And it is also a basic supply and demand issue. More people want the same limited items, the prices will be bid up. If the foreign buyers have more money, then they will be more successful. And since real estate prices are sold based on the last highest price, these small numbers of buyers can have an oversize impact on a rising market.
I don’t blame the foreign buyers. Canada is a beautiful, friendly and stable country. Why wouldn’t a rich person want some real estate here? And it is not just them. Decades of investor class immigrants have caused this imbalance. And it is not all bad. We did benefit greatly from all the money that came in. While other parts of the world suffered through recessions, it often seems milder in Canada due to the influx of foreign money.
There are benefits but one of the negative side effects is that real estate prices are not based on local incomes anymore. If you want to read the official announcement, click HERE.
