Canada bans property acquisition for foreign buyers

Expat news
  • housing in Canada
Published on 2022-04-25 at 11:00 by Asaël Häzaq
Determined to put an end to real estate speculation, the Trudeau government announced a ban on real estate transactions for foreign buyers. Housing has been declared a "great national cause" by the government, which aims to create 400,000 new social housing units per year, compared to 200,000 today. This massive project is expected to support the country's economic growth, faced with multiple crises.

The end of real estate speculation

Re-elected for a third mandate in September 2021, Canadian Prime Minister Justin Trudeau clearly made the real estate crisis one of his priorities, and it looks like the time has come to implement his new housing policy. Over the past two years, real estate prices rose by 50%, on average. Standard accommodation currently costs 869,000 dollars (630,000 euros). The government is not ready to let the speculative bubble grow. So for two years, foreigners will not be allowed to purchase property in the country. However, this measure only applies to speculators and other investors. Residents and students are not affected.

Trudeau believes that the government is running out of time in this regard. The health crisis is still a harsh reality in Canada and continues to affect the economy. Moreover, inflation is increasingly threatening households. Last month, a 6.7% rise was recorded as the prices of consumer goods were almost 9% higher. Besides, since fuel prices are skyrocketing, the government does not want to take the chance of seeing trucks blocking the streets again. It's worth noting that the self-proclaimed "freedom convoys", first gathered to protest against compulsory vaccination, have also gathered protesters against the high cost of living (considering that housing prices account for nearly a third of a household's budget). The government hopes that these new measures will raise confidence among the population.

A Great National Cause

In 2016, real estate speculators accounted for 9% of real estate buyers in Canada, but in 2020, they were only 1%. This could be a sign that times are changing. Canada is determined to put an end to real estate speculation. Tax is one of the ways used to discourage the remaining investors. For instance, main residences sold less than a year after purchase will be subject to higher taxes. "Blind bidding" will also be sanctioned as this controversial system allows keeping the selling price of properties secret – which encourages speculation and leads to higher price proposals.

The Canadian Real Estate Association is formally against this system. On Wednesday, April 7, it announced the setting up of an experimental strategy to display prices in real-time on the Internet. This would mean more transparency and, therefore, less speculation. As promised, this should boost the construction of social housing as one of the government's priorities. Housing is often discredited by governments constrained by their electoral deadlines. A housing plan is built over a much longer period than elections, so they need to show results in the medium term. The Canadian middle classes, including students, and foreign residents, are the first to suffer from the housing crisis. This measure is part of a broader plan to provide a stock of housing (the famous "great national cause") to ultimately support and even encourage economic growth.