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Canada relaxes ban on foreign homebuyers

By RENA LI in Toronto | chinadaily.com.cn | Updated: 2023-03-29 10:37

Canada has eased its ban on residential property purchases by foreign buyers three months after the law came into force.

A series of amendments were introduced on Monday to expand exceptions to the regulations.

As of March 27, those who hold a work permit or are authorized to work in Canada under the Immigration and Refugee Protection Regulations will be allowed to purchase residential property. 

The exception also allows non-Canadians to purchase residential property for the purpose of development. Previously, that exception was only applicable to publicly traded corporations.

Another change allows non-Canadians to purchase vacant land zoned for residential and mixed use, which was prohibited previously.

Lastly, the control threshold has increased from 3 percent to 10 percent for privately held corporations or privately held entities formed under the laws of Canada or a province and controlled by a non-Canadian. 

Ahmed Hussen, minister of Housing and Diversity and Inclusion, said the amendments aim to provide greater flexibility to newcomers and businesses seeking to contribute to Canada. 

"These amendments will allow newcomers to put down roots in Canada through home ownership and businesses to create jobs and build homes by adding to the housing supply in Canadian cities," he said in a statement.

Four amendments to the foreign buyer ban expanded exceptions to allow non-Canadians to purchase residential properties under certain circumstances and seemingly address many of the concerns raised over the last few months. 

The Prohibition on the Purchase of Residential Property by Non-Canadians Act, which came into effect on Jan 1, applied restrictions on any direct or indirect purchase of residential property by non-Canadians for a two-year period.

The act passed by Parliament last June was seen as a means of tackling Canada's housing crisis and tempering rampant home price across the country's hot markets. 

It stipulated that non-citizens and non-permanent residents be banned from purchasing a residential property in Canada until the beginning of 2025, with a penalty of up to $10,000 for those found in violation.

However, experts said the act and its regulations have caused "unintended consequences" for Canada's real estate industry, including some developers shelving plans to build new housing. 

Benjamin Tal of CIBC Capital Markets told Canadian media that the foreign buyers are a "negligible factor" at best, noting that non-Canadians own a minimal share of the housing stock in the hottest markets, such as only 2.2 percent in Ontario and 3.1 percent in British Columbia.

"The damage is real," Tal said. "Many commercial real estate deals have been canceled or are on hold despite the fact that they have nothing to do with residential housing. Developers that are partly foreign-owned or rely on foreign equity cannot proceed with purpose-built developments that are the most effective tool to tackle Canada's housing affordability crisis."

Responding to Monday's move, Micheal Bourque, CEO of the Canadian Real Estate Industry (CREA), told Real Estate Magazine that the ban "wasn't necessary" in the first place, and it's been a failure from start to finish.

"We predicted it would affect housing supply because a lot of developers rely on foreign investment to be able to afford to build buildings," Bourque said. "We've heard a number of stories about that causing people to change their minds, and we already have a housing shortage."

Trevor Koot, CEO of the British Columbia Real Estate Association expressed his concern to the magazine for what he described as a "hasty" decision-making process in implementing the policy on the federal government's part.

"Fallout from the legislation was abrupt, with immigration numbers into the country reaching an all-time high and the desperation for more housing developments in every corner of the country," Koot said. 

"Newcomers were met with a less than cordial arrival when they realized that owning a home was not an option, and developments that had a small fraction of foreign ownership or were zoned for mixed use, were suddenly sidelined because of the narrow parameters of the policy."

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