The Canadian government will prohibit non-resident foreigners from acquiring real estate in the country as an investment. The objective of the measure would be to control the prices of the real estate market.
“Through this legislation, we are taking steps to ensure that homes are owned by Canadians for the benefit of everyone who lives in this country,” Housing Minister Ahmed Hussain said in a statement.
Investors seeking to invest in the North American country to gain economic returns would then be unable to do so.
The ban is not permanent; In principle, it is set for a period of two years.
BBC reports that the average price of a home in Canada is about 770,000 Canadian dollars, about 2.8 billion pesos, which is more than 11 times the median family income.
Justin Trudeau Campaign Promise
According to many Canadian politicians, the increase in prices in the real estate market in Canada is due to the participation of foreign buyers, who were responsible for introducing housing supply as an investment option. The regulation was actually a campaign promise by Canadian Prime Minister Justin Trudeau.
“The lure of Canadian homes is attracting speculators, wealthy corporations and foreign investors,” the Trudeau party’s Liberal CA campaign website said last year. “This is creating a real problem of unused and vacant housing, rampant speculation and skyrocketing prices. Houses are for people, not investors.
According to the site, the rule will be specifically aimed at reducing investment, so if someone plans to stay in Canada in the short term, they will be exempt from the prohibition.
This would apply to “a non-recreational residential property in Canada for the next two years, unless the purchase is confirmed to be for future employment or immigration within the next two years.”Explain site.
Similarly, the regulation proposes to raise taxes on “non-resident and non-Canadian owners of vacant and unused dwellings”.
Similarly, for the territories to work to develop a framework in which the purchase of homes by foreigners does not prevent Canadians from accessing homes in the country.
Real estate market experts have raised doubts about the measure’s potential effectiveness in controlling real estate prices, noting that the proportion of foreigners investing in real estate in the country would need to change to have a real impact on prices. It is very little.
“I think it’s a lot more policy than economic policy,” Brendan Ogmundson, who serves as chief economist for the British Columbia Real Estate Association, tells CBC Canada.
“Most of the public has become convinced in recent years that it is foreign investors and foreign money that are driving up domestic prices, rather than what it is actually doing: low-interest rates and too little supply,” he says. Huh.
Some pundits have talked about the New Zealand market, where a similar measure was taken in 2018, with no real market impact seen.
“If you’re looking for evidence that New Zealand’s ban on foreign buyers has had any effect on the housing market, you’re really not going to find anything,” Brad Olsen, chief economist and director informetrics economic consultancy based in Wellington, New Zealand.
In the case of New Zealand, for example, around 2.9% of home buyers were non-residents at the time of the ban, the percentage has now been reduced to 0.4%, meaning no reduction in house prices, not even stabilization.