Canada amends foreign homebuyer ban regulations

Houses for sale in Ottawa

The Canadian government has announced amendments to the regulations surrounding the country’s foreign homebuyer ban

The Prohibition on the Purchase of Residential Property by Non-Canadians Act came into effect on Jan.1, as an attempt, the government said previously, to improve affordability for Canadians looking to buy a home.

While temporary, the act and its regulations have caused confusion and unintended consequences for Canada’s real estate industry, including some developers shelving plans to build new housing.

The changes, announced Monday, expand 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. 

 

Amendments to regulations

 

Exception for development purposes

There is now an exception for development purposes. This exception allows non-Canadians to purchase residential property for the purpose of development.

The amendments also extend the exception currently applicable to publicly traded corporations under the act to publicly traded entities formed under the laws of Canada or a province and controlled by a non-Canadian.

 

The prohibition no longer applies to vacant land

The prohibition previously applied to all lands zoned for residential and mixed-use, but it now only applies to developed residential properties. 

Vacant land zoned for residential and mixed-use can now be purchased by non-Canadians and used for any purpose by the purchaser, including residential development.

 

More work permit holders eligible to purchase a home

Another amendment will enable more work permit holders to purchase a home to live in while working in Canada. 

Work permit holders are eligible if they have 183 days or more of validity remaining on their work permit or work authorization at the time of purchase and they have not purchased more than one residential property. 

 

Increase in the corporation foreign control threshold

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

 

Industry reaction

 

Trevor Koot, CEO of the British Columbia Real Estate Association, responded to the news in an email to Real Estate Magazine, expressing his concern 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 development in every corner of the country,” Koot wrote.

“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.”

Micheal Bourque, CEO of the Canadian Real Estate Industry (CREA), spoke with Real Estate Magazine shortly before the government announced the changes.

“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.”

Bourque said the ban, which ends in two years, wasn’t necessary in the first place, and it’s been a failure from start to finish.

“This was really about trying to prevent people from buying condominiums primarily and leaving them empty . . . and causing us to have a housing shortage while there are these empty units sitting there,” said Bourque.

 

Impact on housing development

 

Anita Springate-Renaud, owner and broker of record of Engel & Völkers in Toronto, said the impact of the foreign homebuyer ban has been negligible in the resale housing market, but she has seen the new development and the condo market.

“That’s where a lot of the foreign buyers predominantly would be buying— investment properties, condos. And typically, it was the smaller condos,” she said. 

“We’ve seen impact there because there’s been a lot of developments, developers who have pulled the plug on developments.

“Statistically, you could see most of the (resale) homes were not being bought by foreign buyers. It’s really a tiny, tiny percentage.”

“The industry is on the front lines of business and is ready to consider all ideas that will move the needle on affordability, but they need to be asked,” says Koot

 

Koot is calling on the government, regulators and other stakeholders to engage with the industry to ensure policies are properly vetted and address the country’s complex housing issues.

“The industry is on the front lines of business and is ready to consider all ideas that will move the needle on affordability, but they need to be asked, and the time needs to be taken to properly engage.”

He added, “We don’t need to be in a rush; no single policy is going to be a silver bullet.”

The amendments took effect immediately, coming into force Mar. 27. 

 

With files from Mario Toneguzzi 

Source link
Ottawa New Listings

Leave a Reply

Your email address will not be published. Required fields are marked *