What to know about the new foreign buyers ban
Based on information provided by RAGBOS®, the Realtor’s Association of Grey Bruce Owen Sound:
In the last federal election campaign, the three main political parties made commitments related to limiting or heavily taxing foreign buyers wishing to purchase property in Canada. While commitments varied slightly, the policy intent was similar. Each sought to temporarily limit or disincentivize foreign buyers in order to prioritize domestic ones. The hope was this would tamp down increasing home prices.
The experience with British Columbia’s Foreign Buyer Tax (implemented in August 2016) and the Speculation and Vacancy Tax (2018), provides some indication on the impact of a ban on foreign buyers. Their experience suggests such measures have a small and often temporary effect on real estate markets, housing availability and affordability. The effects are largely isolated to large metropolitan markets, with no statistically significant impact in smaller communities.
On June 23, 2022, Parliament passed the Prohibition on the purchase of residential property by non-Canadians Act.
Coming into force January 1, 2023, this Act:
- Does not apply to Canadian citizens and permanent residents.
- Applies to non-Canadians directly or indirectly purchasing residential property in Canada for a period of two years.
- Could impact residential property, including detached houses or similar buildings of one to three dwelling units, as well as parts of buildings such as semi-detached houses, condominium units, or other similar premises.
- Applies to direct or indirect purchases of residential property, including purchases made through corporations, trusts or other legal entities.
- Establishes penalties for non-compliance applicable to non-Canadians, as well as any person or entity knowingly assisting in violating the prohibition.
Please keep in mind the current January 1, 2023 “coming into force” date. CREA interprets this to mean should a non-Canadian enter into an agreement to purchase a relevant property on December 31, 2022, or sooner, the prohibition would not apply to that transaction. The language used in the Act suggests the prohibition applies to agreements of purchase and sale begun after January 1, 2023.
The Government has not yet released regulations, which typically clarify and define terms within the Act. CREA’s understanding and interpretation of this legislation may change upon reviewing the upcoming regulations. Legislation may be complicated so it’s always a good idea to consult a lawyer for advice or guidance.”
To read the Canadian Real Estate Association’s full submission, click here.