B.C.’s hot markets have already cooled due to rising interest rates and the foreign-buyers tax has already deterred a number of foreign purchases
Author of the article: Derrick Penner Published Jan 02, 2023
Canada’s temporary ban on foreign purchases of residential real estate sends the world a mixed message just as this country is ramping up immigration, but few B.C. experts expect it to have a major effect in this province.
“The message it sends broadly is that we’re not open for business,” said realtor Adil Dinani, who is with the Dinani Group, Real Estate Advisors.
However, “those folks who are getting work permits can still purchase,” as they are included in exemptions to the ban, Dinani said.
The measure, which Prime Minister Justin Trudeau’s government campaigned on in the last election as a means to reduce competition in an environment of soaring property prices, came into effect Jan. 1 and is set to remain for two years.
Regulations enacting the ban prohibit people who aren’t citizens or permanent residents from buying residential real estate, defined as buildings with fewer than three units, such as semi-detached homes, or condominiums.
Exemptions to the ban, however, include foreign students in authorized programs who have lived mostly in Canada and filed tax returns here, and temporary foreign workers with valid work permits who have worked full time here for three of the past five years, or have not previously purchased property.
It also doesn’t include properties worth less than $500,000 or those that are outside of major cities or so-called “census agglomeration areas,” with a core population of at least 10,000 people.
Canadian property markets, however, have slowed and property prices fallen due to higher interest rates.
And in B.C., the provincial foreign-buyers tax, now set at 20 per cent, has already reduced foreign purchases.
“It’s obviously a negative message in already what’s a fairly soft market, but remember, we already had such a deterrent,” with the 20-per-cent tax, Dinani said.
Dinani said his group had one buyer out of about 160 clients who would fall into the definition of a foreign buyer.
From the B.C. Real Estate Association’s perspective, the share of foreign buyers in B.C.’s market had fallen to less than half a per cent in the last two years, “so taking that down to zero doesn’t mean a whole lot,” said Brendon Ogmundson, the organization’s chief economist.
“At least one year during the pandemic, (we) essentially shut off immigration and shut off foreign investment, and we had record home sales and prices,” Ogmundson said. “So, clearly this is not that important a segment of the market. The ban is more politics than economics.”
Relocation experts worry that the measure will make it harder for bigger companies to recruit talent, particularly senior executives who have choices for where they want to work.
Stephen Cryne, CEO of the Canadian Employee Relocation Council, told a Globe and Mail columnist he’s had members already hesitating to make executive moves based on the temporary ban.
His organization lobbied government for a blanket exemption for anyone with a valid permit to work in Canada, or for transactions related to purchasing property for employee relocation. In a news release issued Dec. 21, the Council said the federal regulations don’t measure up.
In B.C., however, most skilled temporary foreign workers coming to the province rent before deciding where they might buy, Dinani said.
“Could it prevent some people from moving here if they can’t buy? I think so,” Dinani said. “But I think (that) is a smaller percentage.”
Ogmundson added that the temporary ban does “send an odd message to the world about how open Canada is.”
“I guess we’ll find out over the next year if we hit our immigration targets and we’re not having much of a problem in attracting people to Canada,” Ogmundson said.
Andy Yan, director of the City Program at Simon Fraser University said measures such as Canada’s temporary ban aren’t new. New Zealand, Australia, Hong Kong and Singapore have already put similar restrictions in place.
“Really, again, this is all the fact that we have just finally woken up to the fact that Canadian residential real estate occupies a global marketplace,” Yan said.
And he added that by focusing on buyers, it still doesn’t get at the influence that foreign capital has had on B.C. markets in particular.
“It’s just for two years, it’s time limited, there are sizable exemptions, which I doesn’t necessarily, I think, address the channels of foreign capital that came into several respective markets,” Yan said.