The Government of Canada has unveiled four amendments to its foreign buyer ban less than three months after the legislation took effect.
Officially known as the Prohibition on the Purchase of Residential Property by Non-Canadians Act, the two-year ban was the federal government’s response to addressing growing concerns about housing affordability.
However, some industry stakeholders had been critical of certain details in the legislation, arguing they were too restrictive.
“There were issues and concerns with the wording of the regulations brought forward in December,” Jasmine Toor, Director of Public Affairs at Mortgage Professionals Canada, wrote in a communication to members. “This caused problems for homebuyers and mortgage professionals that we urged decision-makers to rectify.”
“Additionally, the government revised its FAQs as a response to our push for greater clarity on the ban,” Toor added.
The four key amendments announced Monday by the Minister of Housing and Diversity and Inclusion include:
- Work Permit Holders
Non-Canadian work permit holders were initially included in the ban, but critics argued that was contradictory to the government’s immigration goals. As a result, work permit holders are now exempt from the ban as long as they have 183 days or more of validity remaining on their work permit.
- Vacant land exemption
The restriction preventing non-Canadians from purchasing vacant land zoned for residential or mixed has been lifted.
- Exception for development purchases
Non-Canadians will also now be able to purchase residential property for the purpose of development. This exception was only applicable to publicly traded corporations in the original legislation.
- Increase to the foreign control threshold
The ban initially prevented privately held corporations or entities from purchasing residential property if a non-Canadian owned 3% or more. That threshold has now been increased to 10% following concerns from developers that the 3% threshold was too restrictive and would hinder the development of new housing.
The government also clarified that the ban does not apply to non-Canadians who made offers of purchase prior to the January 1, 2023, coming-into-force date, even if the sale is finalized after that date.
Full details of the foreign buyer ban are available on the government’s website.
Housing market outlook is “bright,” says Deloitte Canada
There’s “good news” on the housing front, according to Deloitte Canada’s latest economic outlook, which forecasts the market to reach a bottom by the third quarter of this year.
“The good news on the housing front is that the end of the downturn is in sight,” reads the Economic Outlook. “With expected rate cuts starting at the end of this year and throughout 2024, the recovery will begin.”
This follows a 40% year-over-year plunge in home sales as of February and average prices down nearly 20% compared to last year.
However, the report says prices will be supported as demand returns to the market.
“Over the medium term, the housing market outlook is bright,” Deloitte says. “Strong population gains, thanks to increasing immigration targets, will significantly boost demand, and this [will] support a rebound in housing prices and residential investment.”
Teranet-National Bank Home Price Index decline rivals 2008 financial crisis
The cumulative decline of the Teranet-National Bank Home Price since the peak in prices is now at its largest contraction in the index’s history.
The index is down 11.2% since reaching a peak in May 2022, which surpasses the 9.2% peak-to-trough decline during the 2008 financial crisis, National Bank reported.
“With the Bank of Canada expected to keep its policy rate in restrictive territory well into 2023 and mortgage rates remaining high, we believe that the impact on property prices should continue to be felt in the coming months,” the report says. “All in all, we still anticipate a total correction of about 15% nationally by the end of 2023, but this assumes that policy rate hikes are over and declines begin at year-end.”