15 Feb Intro to Foreign Buyers Ban
With the introduction of Canada’s new ban on foreign buyers, many are wondering what impact it will have on the housing market. In this blog post, we’ll unpack this new legislation and provide insight on what it means for the County of Simcoe and beyond.
What is the Foreign Buyers Ban?
Over the summer, Canada passed legislation introducing the Prohibition on the Purchase of Residential Property by Non-Canadians Act. This Act, which came into effect on January 1, 2023, bans any non-Canadian from purchasing residential property, with few exceptions.
The ban applies to residential properties such as detached homes, condos, townhomes, and vacant land with residential or mixed-use zoning. Its purpose is to stabilize housing prices and increase supply to Canadian citizens by banning foreign investors who view Canadian properties as a commodity, not a place to live.
Who is a Foreign Buyer?
The Act’s definition of a foreign buyer includes individual non-Canadians, and corporations formed under non-Canadian laws or whose shares are not listed on a Canadian stock exchange.
Exceptions include Indigenous persons, permanent residents, refugee claimants, persons residing in Canada on temporary work permits, and international students who meet certain criteria. The ban does not apply to renters or to foreigners with a Canadian spouse.
What are the Consequences for Violating the Ban?
Any individual or corporation that violates the Act faces a fine of up to $10,000. Additionally, if convicted, property purchased by a foreign buyer is subject to court ordered sale, with the foreigner prevented from profiting off the proceeds.
Due to the language use in the ban, realtors, lawyers, lenders, and mortgage brokers should proceed with caution. While these professionals will not be tasked with enforcement, they do have a duty to inform foreign buyer clients of the new legislation.
With that said, simply counseling a foreign buyer to proceed with a purchase (directly or indirectly) subjects that person to the same $10,000 fine as the foreign buyer. Therefore, property acquisition professionals should proceed with caution when working with foreign individuals or corporations in the residential market.
What Impacts can be Expected from the Ban?
While the ban is scheduled to last two years (until 2025), it is unlikely that the County of Simcoe will see much, if any, impact.
For starters, foreign buyers make up less than 5% of the Ontario residential real estate market and are already subject to steep taxes in cities like Toronto. If these taxes are any indication of impact, the effects of the ban are likely to be temporary and isolated to larger metropolitan markets, with no significant impact on smaller communities.
Secondly, foreign buyers are much more prevalent in condos (specifically higher-end luxury condos) than in detached or semi-detached homes. Lastly, the ban does not apply to recreational properties, or to municipalities with a core population of 10,000 people or less.
Thus, GTA municipalities with a higher concentration of condos are most likely to see an impact, while small towns and areas with a high concentration of cottage properties are not likely to be affected.