The government of Prime Minister Justin Trudeau is seeking to improve the level of housing affordability by enacting a two-year ban on foreign buyers of Canadian residential properties.
What Happened: Canada’s housing market has become increasingly expensive, with the Canadian Real Estate Association defining the national average for a home price at approximately $648,200.
According to a report in the Financial Post, refugees, international students seeking permanent residence status and foreigners with work permits would be exempt from the two-year ban. The Finance Ministry said it would monitor the impact of the ban to determine its effect on housing costs and would be open to extending it further.
The ban follows a pledge made by Trudeau’s Liberal Party, which defended the ban on its website by explaining, “This will also allow us to work with provinces and municipalities to develop a framework to better regulate the role of foreign buyers in the Canadian housing market so that this money does not deter housing from being available for and used by Canadians.”
What Happens Next: The impact of foreign homebuyers on Canada’s housing market is unclear. The government did not provide data on how many Canadians have been denied homeownership due to competitive bidding by non-Canadians.
However, taking aim at foreign homebuyers has gained political traction. Bloomberg reported the federal government enacted a national 1% tax earlier this year on the value of vacant or underused properties owned by foreign nationals. At a provincial level, Ontario’s government announced it was increasing its foreign homebuyers’ tax from 15% to 20% while Nova Scotia’s government is planning new taxes on non-resident homebuyers.
While trying to block foreign homebuyers, the Trudeau government is also proposing new measures to encourage homeownership affordability for Canadians, including the creation of a tax-free First Home Savings Account for first-time homebuyers and a plan to allocate $4 billion over the next five years for the Canada Mortgage and Housing Corp. to develop 100,000 net new housing units plus an additional $1.5 billion over two years to create 6,000 new affordable units with at least 25% of funding set aside for women-focused housing projects.
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