The federal government has extended the ban on foreign purchases of homes across most of the country by two years, prolonging the existing ban that was set to expire at the end of this calendar year.
This decision comes amidst ongoing controversy surrounding the topic. CMHC and other agencies have historically lacked comprehensive records of foreign capital flows into the real estate market. In June of 2018, CMHC noted that from 2016 onwards, 19 percent of condo presales in Vancouver were sold to non-residents and accounted for 24 percent of all buyers in Richmond and 23 percent in Coquitlam. While this data covers a narrow period, it underscores the potential for fluctuations in foreign purchasing activity within the housing market.
Furthermore, considering the close ties between some Vancouver development firms and funding from mainland China, it is likely that there have been periods of increased foreign buyer activity in Vancouver and other major Canadian cities, so the high levels of presales to non-residents should not come as a surprise.
Since then, the provinces have responded with policies aimed at curbing this activity. British Columbia implemented a 15 percent foreign buyer’s tax in August 2016, later increasing it to 20 per cent in February 2018. Ontario introduced a non-resident speculation tax in April 2017, initially set at 15 percent and raised to 25 per cent in October 2022. Toronto recently approved a 10 per cent non-resident tax on residential properties, effective January 2025. These existing taxes are already a major deterrent to foreign buyers.
Comparisons with purchase activity in the United States suggest that foreign purchases in Canada predominantly target expensive properties, often in suburban areas, primarily for residential purposes tied to educational opportunities for their children. If that holds true, it suggests that foreign buyers are not crowding out first-time homebuyers.
While the government’s foreign buyer policy may be good political theatre, it is likely an unnecessary move to support domestic buyers given the existing provincial policies. With housing starts declining by 7 percent in 2023 compared to 2022, governments are clearly grasping for solutions.
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