Will the Foreign Buyer Ban for Residential Properties in Canada Have a Significant Impact on House Prices?

On January 1st, a foreign buyer ban for residential properties in Canada went into effect. The government has stated that this measure is intended to make housing more affordable in the country. However, it is uncertain whether the two-year ban will have a significant impact, as foreign buyers make up a small portion of the real estate market and numerous exemptions to the ban exist. Canadian citizens and permanent residents, international students and foreign workers who have lived in Canada for a certain number of years, and temporary resident status holders, refugees, diplomats, consular staff, and members of international organizations living in Canada are all exempt from the ban. Recreational properties, such as cottages and cabins, are also exempt.

Data on foreign buyers and owners in Canada is limited. In the provinces and territory measured by the Canadian Housing Statistics Program in 2020, between 2% and 6% of residential properties had at least one non-resident owner. In British Columbia, only 1.1% of transactions in 2021 involved a foreign buyer, down from 3% in 2017. Ontario has also seen a decrease in foreign buyers since implementing a tax on non-resident purchases in 2017.

While the foreign buyer ban may be a politically motivated rather than an economically motivated policy, it is worth noting that low interest rates and low supply are likely larger factors in high house prices in Canada. The ban will not apply to Canadian citizens and permanent residents, international students and foreign workers who have lived in Canada for a certain number of years, and recreational properties. It will only apply to residential properties with three or fewer dwelling units, and there are exceptions for properties in less populated areas.