Industry seeks exemptions for international assignees and RMCs.
In an attempt to cool off a blazing hot housing market, Canada will put a two-year moratorium on foreign home buyers and invest billions of dollars into new construction projects.
The Budget Implementation Act passed in August includes legislation called the Purchase of Residential Property by Non-Canadians Act which prohibits non-Canadians from purchasing, directly or indirectly, any residential property in Canada. The legislation will go into effect on January 1, 2023, and will last for two years.
The legislation will exempt certain temporary workers and permanent residents subject to regulations that must be published prior to January 1, 2023. Stephen Cryne, president and CEO of the Canadian Employee Relocation Council (CERC) is working with the government to obtain exemptions for Relocation Management Companies (RMC) not registered in Canada and Temporary Foreign Workers.
Background to the Legislation
The Trudeau government released its recent budget to address concerns about the rising cost of living in Canada. In a section of the document dedicated to housing affordability, Canada's Deputy Prime Minister Chrystia Freeland called for a two-year ban on some foreign buyers.
This new legislation indicates that Canada's Prime Minister Justin Trudeau is taking a more active role in calming one of the most expensive housing markets among developed nations. It may signal that the Canadian government is increasingly worried about public unrest over inflation and expensive housing.
In the past two years, home prices in Canada have increased more than 50%. In Canada, the benchmark price of a home increased to an all-time high of C$869,300 ($693,000). With house prices on the rise in cities all across Canada, the country has become an increasingly appealing investment opportunity for those looking to make a profit.
A 2019 report concluded that 7.6% of Vancouver homes were owned by non-residents. The paper indicated that the figure was 3.8% in Toronto and 4.3% in Halifax. The joint report by Statistics Canada and the Canada Mortgage and Housing Corporation shows that condos have a much higher rate of ownership among those who don't reside there. For example, Vancouver's rate is 11.2%, while Toronto's is 7.6%. When it comes to new construction, the numbers grow even more.
Exemptions to the Legislation
The legislation will prohibit foreign commercial enterprises and non-Canadian citizens or permanent residents from buying residential property in Canada for two years.
There are specific instances where exemptions will be available to non-Canadian individuals living in Canada, including:
- Temporary residents of Canada, such as students and foreign workers working under federal work permits, who fulfill criteria established by legislation;
- persons who have been granted refugee status;
- A non-Canadian who purchases a home with their spouse or common-law partner but only if the spouse or common-law partner is a:
- Canadian citizen;
- permanent resident of Canada;
- Temporary Resident; or
- Protected Person
The specific terms and conditions surrounding these exemptions will be published in regulations prior to January 1, 2023.
Canada’s New Legislation Will Affect the Mobility Industry
The policy, intended to address growing political concerns about affordability, has been met with skepticism that foreign money is truly a major price driver in Canada.
“I don’t think prices are going to fall as a result, though I do think it takes away at least some of the competition in what is the most competitive market in Canadian housing history,” Simeon Papailias, founder of real estate investment firm REC Canada. “I don’t think a two-year band-aid is going to have an impact on what’s a fundamental lack of supply.”
In reaction to the legislation, Lynn Shotwell, president and CEO of Worldwide ERC, said, “It’s encouraging that the law provides an exemption for temporary foreign workers. Our colleagues at CERC are working to educate the government on the critical role RMCs play in these home purchases and to ensure that the implementing regulations support international assignments. Worldwide ERC’s government affairs council supports their efforts.”
Worldwide ERC will closely follow the Prohibition on the Purchase of Residential Property by Non-Canadians Act and any possible exemptions that may affect the mobility industry. To learn more or get involved in these efforts, contact Tristan North, Government Affairs Advisor, and attend the Real Estate Public Policy Forum at GWS.