It’s long been circled that foreign money has helped push up prices in markets such as Vancouver and Toronto. This price increase in the major cities has pushed Canadians to go into neighbouring cities, driving the average price of those homes also through the roof. This ripple effect has been cascading into the furthest reaches of Canada, leaving most Canadians unable to live the way they might have 5 years ago.
On April 7th, Prime Minister Justin Trudeau’s government announced it will ban foreign investors from buying homes in Canada for two years in a bid to cool off this incredibly hot housing market. There have also been implementations on higher taxes for people who sell their home within a year, as well as billions invested in new housing and measures to help Canadians to get into the market.
The hot button question of the day is – to what extent will this affect Canada’s housing market? There are some economists who believe that the effect of foreign buyers has not impacted the prices of homes as much as we would like to believe. These economists argue that during the pandemic, especially through the many lockdowns we encountered, it was almost impossible to travel so how could foreign buyers be buying up property without physically being here to buy it?
Some economists are arguing that foreign money is buying the bulk of the property in Canada – but not in the direct way that this ban will seek to combat. Many real estate purchases over the past two years have been made by Canadian residents or citizens acting on behalf of relatives or other people living overseas. The two-year foreign buyer ban does not cover people purchasing on behalf of folks overseas.
At the moment, we don’t have significant details about how the federal ban will work. These will be rolling out over the next few months with exemptions (for example recreational properties, or people who are in Canada on student visas who are working up to permanent residency, etc.)
The main issue we face today is that real estate is a provincial responsibility. A federal ban can only regulate so much. For the moment, we aren’t even sure how long the ban will last, as many lawyers are arguing that this ban discriminates against people on the basis of nationality, according to Canada’s Charter of Rights and Freedoms. It could also violate the US-Canada-Mexico Trade agreement by discriminating against American and Mexican buyers.
Brass tacks – what does this all mean?
It means this ban – if it even holds up in court – might not curb the prices of homes as much as the federal government was hoping for because of how foreign buyers are purchasing property in Canada. For the time being, it looks like the Canadian housing market is still going to be sky high.
For more information on today’s market and how we can help you navigate it, you can reach out to our team here.
