What do we know about Canada’s foreign buyer ban?

Canada’s foreign homebuyer ban is now in effect, barring commercial corporations and individuals outside of Canada from buying residential properties in the country.

What is the foreign buyer ban?

As a response to the hot housing market, the Canadian federal government announced the Prohibition on the Purchase of Residential Property by Non-Canadians Act back in June of last year. It means that unless exempted, non-Canadians cannot purchase residential property in Canada.

When will the ban come into effect?

Canada’s foreign buyer ban came into effect this month and it will remain in effect for two years.

Who does the ban impact?

The ban impacts non-Canadian individuals and corporations and prevents them from purchasing residential property in Canada. According to the Act, non-Canadians include:

an individual who is neither a Canadian citizen, a person registered under the Indian Act, or a permanent resident. However, many are awaiting more clarity around exemptions to this ban.

The ban could also impact people who are Canadian residents—there are hefty fines for anyone who knowingly helps someone purchase property who is non-Canadian. These fines could be up to $10,000 and could apply to professions like real estate agents, lawyers, and financial brokers who provide real estate assistance. It’s not clear how this will be enforced, though.

Exemptions from the ban include:

Canadian citizens and permanent residents.
International students who meet certain requirements, including having spent the bulk of the previous five years in Canada. They would be able to purchase a property for no more than $500,000.
Workers who have worked and filed tax returns in Canada for at least three out of the four years prior to purchasing a property.
Diplomats, consular staff and members of international organizations living in Canada.
Foreign nationals with temporary resident status, including people fleeing conflict, and refugees.

Buildings containing more than three dwelling units, and recreational property — such as cottages, cabins and other vacation homes — will also be exempt.

Non-Canadian entities, such as corporations, and foreign-controlled Canadian entities, will be banned from buying property.

Will the ban work?

Many people are skeptical that the ban will dramatically improve housing affordability in the country. The provinces of British Columbia and Ontario already have a foreign buyer tax in effect (20% and 25%, respectively), and it hasn’t seemed to make an impact over the past few years when home prices soared.

In the short term, the ban actually seems to have caused a spike in foreign home purchases, rather than deter them: it appears 75% of U.S. citizens living in border towns and owning recreational properties in Canada made their purchase after the federal government announced the impending ban.