NW Week

Will Canada’s prohibition on foreign homebuyers have an impact?

Will the prohibition on foreign homebuyers in Canada have an impact?

Key Takeaways:

  • Real estate professionals had mixed reactions to Canada’s declaration of a two-year restriction on foreign homebuyers when assessing the market’s ramifications.
  • St. John refers to the Golden Horseshoe region of Ontario’s provincial government’s 15 percent tax on foreign purchasers.

Real estate professionals had conflicting reactions to Canada’s announcement of a two-year ban on foreign homebuyers when evaluating the market’s implications.

On Thursday, Canada’s federal budget included several measures aimed at calming the country’s sweltering housing market, including a $4 billion commitment over two years to assist municipalities with planning and delivery of housing projects, as well as a $1.5 billion commitment for up to 6,000 new affordable housing units. 

A two-year prohibition on foreign property purchases is also among the announcements, though there are a few exceptions, including students and refugees.

In a phone conversation with CTVNews.ca, Nicola St. John of Bosley Real Estate in Ontario said, “I think we saw this previously in 2017.” “I believe it had an impact then, and I believe it will have an influence now.”

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St. John is alluding to the Ontario provincial government’s 15% tax on foreign homebuyers in the Golden Horseshoe region of the province. Since then, Ontario has increased the tax to 20%.

Elan Weintraub, the co-founder of Mortgage Outlet, is concerned that the federal ban will be ineffective due to this fee and a similar levy in British Columbia. He claims that middle-class families will still be unable to enter the property market without substantial adjustments.

“I don’t believe this will assist first-time buyers, and I don’t believe it will assist Canadians in purchasing a home,” he said.

“Many of the actions and programs are nothing more than a red herring.” It does very little. I believe the government should be considerably more explicit about its housing objectives.”

According to St. John, foreign home buying isn’t a huge problem in Canada, but it can make it difficult for Canadians to acquire a home because foreign buyers can sometimes offer much more than the other bids.

“Often, the highest offer will come from a foreign buyer,” she said. “If that’s taken out of the equation, I think prices will drop.” “I believe there will still be a lot of individuals offering, but I believe it will restrict some of the expenditure.”

Will the prohibition on foreign homebuyers in Canada have an impact?
Will the prohibition on foreign homebuyers in Canada have an impact? Image from Reddit

St. John couldn’t say how many transactions she’s seen go to international buyers because of privacy concerns, but she claimed the figure is “not trivial.”

Weintraub proposes stringent tariffs on all real estate investors, regardless of citizenship, rather than a prohibition on foreign homebuyers.

“The main one is homeowners vs. investors; should the government care if someone owns eight houses while another is trying to buy their first?” he asked. “I believe that’s the fundamental principle they need to explain and then put into action.”

Both St. John and Weintraub believe that supply is the main issue in Canada and that the government’s plans to expand housing developments will help to cool the market if they are completed.

“It’s simply great,” St. John stated. “Let’s build more houses.” Let’s give individuals greater opportunities.”

According to St. John, further gains in interest rates and a prohibition on blind bidding (prospective homebuyers are uninformed of how much other bidders are giving) would help chill the market. Blind bidding was one of the pledges made by the Liberals in the run-up to the 2021 election.

Source: CTV News

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