Starting January 1, 2023 lasting until December 31, 2025, the Prohibition on the Purchase of Residential Property by Non-Canadians Act, also known as the foreign buyer ban, came into effect in Canada. In February of 2024, Parliament announced a two-year extension of the ban, now to last until 2027. The CMHC sets out some main measures included in the ban. For example, a residential property is defined as “buildings with three dwelling units or less.” CMHC says the Act does not prohibit the purchase of buildings with four or more units, but rather only smaller buildings or single units. It also says that foreigners can buy residential properties outside census metropolitan areas and census agglomerations. Census metropolitan areas are areas with a minimum population of 100,000, with at least 50,000 people living in the core. Census agglomerations are areas with a population of at least 10,000. The CMHC states that foreign buyers who violate the Act will pay a fine of $10,000, or a judge may order the sale of the property. The CMHC also reports a long list of exceptions to the Act.&nbsp;In their announcement of the two-year extension, the Government cited their reasoning behind the ban. The Government’s main motivation for imposing the foreign buyer ban is housing affordability. They say the ban is one part of their plan to tackle the housing crisis.Has the ban had any effect on housing affordability? (We’ll focus on single detached, semi, and townhouse properties.) Yahoo Finance says no. They report that the ban has not materially lowered prices or boosted inventory. They report that the main area traditionally favoured by foreign buyers showing signs of slowing is the luxury housing market. According to Yahoo, the luxury sector prices have remained stable compared to other sectors of the market, however, they report that the luxury sector is the only sector where demand has fallen materially. Condos are a different matter.Max Steinman from the Globe and Mail suggests the ban has “deepened the very crisis it was meant to alleviate by curtailing the supply of new homes and deterring critical investment in the housing sector.” He says the ban exacerbated the crisis especially in the condo market. He also explains how foreign investors are the ones helping keep the condo projects and developments afloat. He says that foreign buyers make Canadian projects viable and that by banning foreign buyers from our markets, the buyers are going to have to invest in other markets, therefore sustaining another country’s markets.Recently, a group of developers in BC gathered together to write an open letter to the Federal government and the Prime Minister. They called for an elimination of the ban and a re-opening of the market. We have yet to see how the government will respond, however, they are now faced with a dilemma; respond to their donor base, or respond to the youth voting base? We know how they have responded in the past; that’s part of the reason we got to where we are, but they will also need to revise landlord and tenant legislation to protect investors or open door or not, nobody is coming to the party. &nbsp;While many groups are protesting the foreign buyer ban and believe the ban either has no effect or even a negative effect, CityNews Vancouver states the majority of Canadians support the ban. A survey showed only 13% of respondents opposed the foreign buyer ban and 11% said they were undecided. CityNews again cites an economist who also believes the ban on foreign investors will cause housing development projects to stall, creating an overall adverse effect on the market.And in Canada, the sad reality is that politics, its funding, and vote buying often wins over what is good for the country’s long-term health, our prosperity, and in fact what could be our ultimate survival. The foreign buyer ban doesn’t work, but only 13% of Canadian’s oppose it, so here we are. Firearm confiscations are expensive do nothing to reduce crime or violence, but they are politically favoured, so here we are. Capital gains taxes reduce innovation and investment, but Tax the Rich is easier to sell, so here we are. The youth of our nation has had their futures decimated by government policies like unchecked, unskilled, and uncapitalized immigration, reckless and irresponsible deficit spending, and abandoning our resource sector, but it’s hard to make hard choices, so here we are. The list goes on.Would a targeted elimination of the foreign buyers ban help revitalize our housing market? Likely. However, it is just one of the many changes that needs to be applied in order to bring stability and affordability back to markets.&nbsp;We need to stop thinking about housing as a tax revenue “cash cow”. We need to reduce taxes all round and reduce government spending. We need to restore balance and fairness to the landlord and tenant relationship. We need to make hard choices. The list is long, but here is a start.

Canada’s Foreign Buyer’s Ban Extended but Questions Remain

As Canada extends the foreign buyer ban to 2027, the experts question its effectiveness and impact on housing affordability and supply.

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