Canada Amends Foreign Buyer Ban to Allow Certain Exemptions
Months after Canada’s ban on foreign home buyers took effect on Jan. 1, 2023, the Canada Mortgage and Housing Corporation (CMHC) has made several amendments to the legislation allowing non-Canadians to purchase residential properties in certain circumstances.
New Amendments to Prohibition on the Purchase of Residential Property by Non-Canadians Act
On March 27, the Minister of Housing and Diversity and Inclusion Ahmed Hussen announced changes to Canada’s Prohibition on the Purchase of Residential Property by Non-Canadians Act. These amendments primarily affect work permit holders and corporations partially owned by foreigners. The ban was initially passed by Parliament in June 2022 before taking effect in January of this year. It prevents commercial enterprises and individuals outside of Canada from buying residential properties in the country.
Exemptions for Work Permit Holders
Under the new rules, anyone in Canada with a work permit is able to purchase a residential property while working. In order to be eligible, permit holders must have at least 183 days left on their work permit at the time of purchasing a home and cannot already own a residential property. When the legislation initially took effect, it included exemptions for those on temporary work permits, but permit holders were still required to work full-time and file income tax returns for at least three out of the last four years. As part of these new amendments, rules around tax filings and previous work experience have been repealed.
Changes to Vacant Land Purchases and Foreign Control Threshold
The ban will no longer apply to vacant land zoned for residential and mixed use. This means non-Canadians are now able to purchase this land and use it for any purpose, including residential development. Additionally, another exemption is being made to allow foreigners to buy residential property for the purpose of housing development. Based on the amendments, this exception now also applies to publicly traded companies formed in Canada and controlled by foreigners.
The final of four amendments introduced by the federal government involves an increase to the corporate foreign control threshold. The legislation now considers a company to be foreign-controlled if a non-Canadian owns at least 10 per cent of the entity. Previously, the threshold was three per cent.
The Canadian government’s decision to allow non-resident home buyers to purchase vacant land zoned for residential or mixed use development could potentially worsen the country’s existing housing crisis. The lack of a timeline for development and unclear beneficial ownership information leaves room for “Land Banking”, a process of buying and holding land “for development” that has been an issue in Canada since the global financial crisis, according to an article by Better Dwelling. While global capital inflows can be beneficial for a market, inviting non-resident capital without clear guidelines and regulations may lead to increased pressure on home prices.
Benefits for Newcomers and Canadian Housing Market
“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,” reads a press release from the CMHC. Although the national average home price has dropped from its peak about one year ago, housing affordability remains a source of anxiety for many Canadians. By limiting foreign investor activity among residential properties, some market-watchers predict the ban will create new buying opportunities for Canadians by freeing up supply.
Conclusion
Canada has made several amendments to its ban on foreign home buyers, allowing certain exemptions. These changes primarily affect work permit holders and corporations partially owned by foreigners, and also allow non-Canadians to purchase vacant land zoned for residential or mixed use development. While the amendments aim to boost the country’s housing supply and create opportunities for newcomers and businesses, there are concerns that the lack of regulations and unclear beneficial ownership information could lead to land banking and increased pressure on home prices. Nevertheless, some market-watchers predict the ban could create new buying opportunities for Canadians by freeing up supply.
#ForeignHomeBuyers #CanadaHousingMarket #RealEstate #WorkPermitHolders #VacantLandPurchase #HousingSupply #Newcomers #HousingAffordability #ForeignInvestors #LandBanking #CorporateForeignControl #MixedUseDevelopment
Sources:
CTV: Canada makes amendments to foreign homebuyers ban – here’s what they look like
Government of Canada: Justice Laws Website
Better Dwelling: Canada Quietly Rolled Back Parts of Its Foreign Buyer Ban After Just 86 Days