Buildings in the city of Toronto, September 2020. CHRIS HELGREN (Portal)
Canada introduced a new ban on January 1: foreigners are not allowed to buy real estate in the country. The provision, which will apply for two years, affects non-permanent residents, and some exemptions are also provided for foreign students, work permit holders and asylum seekers. With this and other measures, Justin Trudeau’s government wants to stabilize the real estate market, which has skyrocketed in recent years.
Starting Sunday, Ottawa will impose a fine of up to CA$10,000 on foreigners who buy real estate. And any person or company helping to complete the transaction will face an economic penalty that could reach the same amount. According to the norm, the Supreme Court of the province where the property is located “can issue an order and compel the sale of the property in the manner and on the terms specified.”
Banning these purchases was a campaign pledge by the Liberal Party of Canada — Trudeau’s faction — in the 2021 election campaign. The initiative, approved by lawmakers last June, adds Canada to the short list of countries that have these types of bans in place . New Zealand implemented a similar measure in August 2018. Likewise, foreigners cannot purchase real estate on the Aland Islands in Finland.
Ahmed Hussen, Federal Minister for Housing, Diversity and Inclusion, said in a December 21 statement: “Housing should not just be property. It is meant to be lived: a place where families can put down roots, make memories and build a life together. With this law, we guarantee that homes are owned by Canadians, for the benefit of all people who live in Canada.”
The Canadian government has taken other measures to combat the problem, which has particularly worsened during the pandemic years. For example, tax incentives for buying a first home, financial injections for construction projects and monthly help for people who have difficulty finding affordable rent. Also, on January 1st, a new tax came into effect for people who buy and sell a house within 12 months; a practice known as flipping.
Chrystia Freeland, Treasury Secretary and Deputy Prime Minister, said in the House of Representatives last April as she outlined the elements of the project: “People make our economy, and those people need houses to live in. Here’s the problem: Canada doesn’t have enough housing. We need more, and we need them fast.” The average price in the country rose 44% between December 2019 and February 2022. Vancouver and Toronto were the hardest-hit cities.
However, the ban on buying foreigners has triggered a wave of criticism. Several experts question the real impact of the measure, claiming that non-Canadian residents have little to do with the housing crisis and pointing to an issue linked to national factors. A Baker Insights Group report showed that non-resident foreigners bought 1% of homes sold in the country in 2020.
Liberals and conservatives had promised this measure in their programs. Not so the New Democratic Party, Trudeau’s partner in government, who regretted that instead of vetoing foreigners, they did not introduce a tax rate like that already in place in the provinces of British Columbia and Ontario, where foreigners are taxed at 20% on transactions. However, the results are rather discreet, reassuring the real estate industry that foreign buyers are not the main problem, which is why they are pushing to encourage construction to counter the supply shortage.
In Europe, after the Great Recession, many countries like Spain or Portugal did the opposite and encouraged the sale of houses to foreigners with the so-called golden visas, which were heavily criticized by Brussels. However, some regions are beginning to view Canada’s trail as a trail to be explored. This is the case of the Balearic Islands, which have opened the debate on the ban given the serious housing problems of some cities, especially Ibiza. There the figures are different: almost 40% of operations are performed by foreigners.
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