A law that prohibits foreigners from buying residential property in Canada went into effect this Sunday, with the aim of making more homes available to Canadians, who are facing a housing shortage.
Several exceptions in the law allow non-citizen refugees and permanent residents to buy homes.
In late December, Ottawa also clarified that the ban would only apply to urban housing and not recreational property such as vacation homes.
The temporary measure, lasting two years, was proposed by the Prime Minister Justin Trudeau during the 2021 election campaign, when rising prices put homebuying out of reach for many Canadians.
“The lure of Canadian housing is attracting speculators, wealthy corporations and foreign investors,” his Liberal Party said at the time on its electoral sheet.
“This is causing a real problem of underused and empty homes, rampant speculation and sky-high prices. The houses are for the people, not for the investors”.
Following their 2021 election victory, the Liberals quietly introduced the Residential Property Purchase Prohibition Act by Non-Canadians.
Big markets like Vancouver and Toronto have also introduced taxes on non-residents and vacant homes.
Despite its recent heyday, the country’s property market has cooled off for sellers as mortgage rates followed the Bank of Canada’s aggressive monetary policy in an attempt to curb inflation.
According to the Canadian Real Estate Association, median home prices have fallen from a high of over C$800,000 (US$590,000) in early 2022 to just over C$630,000 (US$465,000) last month.
Many experts have also said that the ban on foreign buyers – who accounted for less than five percent of home ownership in Canada, according to the national statistics agency – would not have the desired effect of making housing more affordable.
Rather, they point to the need to build more homes to meet demand.
The Canada Mortgage and Housing Corporation, the nation’s housing agency, said in a June report that about 19 million homes will be needed by 2030.
This means that 5.8 million new homes will have to be built, that is, 3.5 million more than what is currently expected to be built to meet that demand.
With information from AFP