3 Things You Need to Know About Foreign Buyer Ban 2023
As of January 1st, 2023, the foreign buyer ban is in effect in Canada which prohibits non-resident individuals as well as foreign commercial enterprises from buying residential property in the country. The regulation was passed by the Parliament in June of last year and will remain in force for the next two years.
This comes after the Canadian housing market rose to a national peak in February of 2022. COVID-19 and the rising inflation in the first half of 2022 directly lead to home prices skyrocketing and making housing affordability a concerning debate in every Canadian household.
Apart from this, the aftermath of inflation and the subsequent interest rate hikes from Bank of Canada fuelled more anxiety amongst those who are already on a variable rate mortgage as the trigger rate kicked in.
As the ban takes effect in Canada, here’s the following important information you need to know about this regulation:
What Type of Properties are Included in The Ban
The Prohibition on the Purchase of Residential Property by Non-Canadians Act states that residential properties are included in this ban.
In this case, a residential property includes detached homes, semi-detached homes, rowhouse units, residential condominium units or other similar premises.
The regulation applies to residential areas in metropolitan areas or a census agglomeration.
A census metropolitan area is an area that has a total population of at least 100,000 people, with at least half of them (50,000) living in the core of the area.
While a census agglomeration has a population of at least 10,000 people living in its core.
Regulations also apply to vacant land plots that do not have any buildings on them yet but are zoned for residential and mixed use developments.
What Properties are exempt From this Ban?
Homes in municipalities that have less than 10,000 people making up its population are not subject to this regulation.
Neither are recreational properties like lake homes and cottages.
What Is The Reason For This Foreign Buyer Ban?
The biggest benefit that the government hopes from the crackdown on foreign residential investment is to make homes more affordable to those living in Canada.
Housing affordability in Canada plummeted this past year due to low supply in the market and also the rising interest rates from the Central bank. The government hopes that putting a stop to foreign buyers will help the Canadian housing market to focus on increasing the supply for residents living in the country.
Real Estate experts have offered mixed reactions to this ban as some say that the foreign ownership is but a small percentage of residential properties in Canada and are not sure if it will really have an impact on the housing market.
Who Is Exempt From This Ban?
Canadians & Permanent Residents:
As the name of the ban implies, only foreign buyers are banned from buying residential properties in Canada. Canadian citizens and Permanent Residents are exempt from this regulation.
International Students (Conditional)
International students who have filed tax returns for the past five years and have spent the majority of the past five years in Canada are excluded. In addition, the purchase price of the residential property must not exceed $500,000.
Work Permit Holders (Conditional)
Those who hold a work permit may also be excluded provided they must have worked in Canada for a minimum of three years within the four years preceding the purchase and filed tax returns for at least three of the four years.
There are also exceptions for foreign nationals fleeing conflict and refugees under this regulation.
It is important to note that the government has said the onus on demonstrating the eligibility for any non-resident that is exempt from the regulation on that person itself.
There is also a fine of up to $10,000 for any non-Canadians who violate the ban and may be required to sell the property they purchase.
Something To Look Out For
As the ban goes into effect, the vagueness of it has not escaped the Canadian Real Estate Association (CREA) and many Realtors.
For instance, it is still not clear that the persons who are exempt from the ban – if they do buy a property under this regulation, would they still have to pay the foreign buyer tax of 20% on the purchase price?
Or would this new regulation do away with this Non-Resident Speculation Tax in Canada?
We, at ipresalecondos.com, are working with our lawyers and government agencies to find out exactly what the fine print means and to clarify all the vague details of this new regulation.
Stay tuned for more details on the topic!