Canada implemented a new ban on January 1st: foreigners cannot buy real estate in the country. The provision, which will be valid for two years, will not affect permanent residents in the country and some exceptions are also contemplated for foreign students, work permit holders and asylum seekers. The Government of Justin Trudeau seeks with this and other measures to stabilize the real estate market, which has skyrocketed in recent years.
Ottawa imposes from Sunday a fine of up to 10,000 Canadian dollars (about 6,900 euros) to foreigners who acquire real estate. And any person or firm that helps carry out the transaction will receive an economic sanction that could reach the same amount. According to the norm, the Superior Court of Justice of the province where the property is located “can issue an order and force the sale of the property in the manner and conditions established.”
The ban on these purchases was a campaign promise of the Liberal Party of Canada – Trudeau’s group – in the 2021 campaign. The initiative, which was approved by parliamentarians last June, adds Canada to the short list of countries that these types of prohibitions apply. New Zealand implemented a similar measure in August 2018. Likewise, foreigners cannot purchase real estate on the Aland Islands of Finland.
For the benefit of all people who live in Canada
Ahmed Hussen, federal minister for Housing, Diversity and Inclusion, said in a statement on December 21: “Housing should not just be property. It is meant to be lived in: a place where families can put down roots, make memories and build a life together. With this Act, we guarantee that housing is owned by Canadians, for the benefit of all people who live in Canada”.
The Canadian government has put other measures in place to combat the problem, which has been especially aggravated during the pandemic years. For example, tax incentives for the purchase of a first home, injections in construction projects and monthly aid for people with difficulties finding an affordable rental. Likewise, on January 1st, a new tax also entered into force for those people who buy and sell a home within a period of 12 months; a practice known as flipping.
Economy built by people
Chrystia Freeland, Finance Minister and Deputy Prime Minister, declared in the House of Representatives last April, when she outlined the elements of the project: “Our economy is built by people, and those people need houses to live. Here’s the problem: Canada doesn’t have enough housing. We need more, and we need them fast.” The average price in the country increased by 44% between December 2019 and February 2022. Vancouver and Toronto have been the most affected cities.
However, the ban on foreigners buying real estate has raised a wave of criticism. Several experts doubt the real impact of the measure, since they maintain that people who do not reside in Canada have little to do with the housing crisis, pointing to an issue related to national factors. A Baker Insights Group report showed that non-resident foreigners bought 1% of the properties sold in the country in 2020.
Liberals and conservatives had promised that measure in their programs. Not so the New Democratic Party, Trudeau’s government partner, which regretted that, instead of this veto on foreigners, a rate was not imposed like the one already in place in the provinces of British Columbia and Ontario, which tax at a rate 20% foreign transactions. The results, however, have been rather discreet, which reassures the real estate sector that foreign buyers are not the bulk of the problem, which is why they advocate encouraging construction to combat the shortage of supply.
In Europe, many countries like Spain or Portugal did the opposite after the Great Recession, encouraging the sale of homes to foreigners with the so-called golden visas, highly criticized by Brussels. However, some regions are beginning to see Canada’s path as a route to explore. This is the case of the Balearic Islands, which, given the serious housing problems suffered by some towns, especially Ibiza, has opened the debate on the ban. There, the numbers are different: almost 40% of the operations are carried out by foreigners.
