Trudeau to ban foreigners from buying homes in Canada as housing affordability declines

by Editor

Prime Minister Justin Trudeau wants to stop foreigners from buying real estate in Canada because rising markets are making it impossible for Canadians to own their own homes.

But people aren’t sure that foreign money is a big reason why prices are going up in Canada, which is why the policy was made. It was made because of growing political concerns about affordability.

A survey from the Canadian Real Estate Association found that home prices across the country went up by 27.1% in March compared to the same time last year, even though February was even hotter.

Households in Canada are also experiencing the effects of months of high inflation, which has been fueled in part by rising food and petrol prices. In March, the annual inflation rate reached a 31-year high of 6.7 percent.

Political foes perceive the prime minister’s weakness as rising cost-of-living concerns. Runaway house prices, which are particularly felt by younger Canadians, are at the center of the argument.

The Trudeau government responded to the concerns in his recent budget. Chrystia Freeland, who is also Trudeau’s finance minister and deputy prime minister, spoke in favor of the two-year ban on some foreign buyers during a segment about the cost of homes.

“For years, foreign money has been coming into Canada to buy residential real estate,” referring to the ban, which Trudeau’s Liberals committed to enacting during the election campaign last year.

Under Trudeau’s ban, foreign commercial firms and anyone who is not a Canadian citizen or permanent resident would be barred from purchasing non-recreational residential property for two years.

The plan, on the other hand, provides a slew of exceptions. For example, the restriction would not apply to refugees, people admitted to Canada for humanitarian reasons, international students pursuing a permanent residency or people with work permits currently in the country.

According to a 2019 survey from the Canadian Housing Statistics Program (CHSP), at least one non-resident owned 7.6% of residences in Vancouver. The figure was also 3.8 percent in Toronto and 4.3 percent in Halifax, according to the report.

Statistics Canada and the Canada Mortgage and Housing Corporation released a joint report that revealed substantially higher rates of non-resident condo ownership – 11.2 percent in Vancouver and 7.6 percent in Toronto, for example. When it comes to new construction, the numbers rise much higher.

In recent years, provinces like Ontario, where the government just announced a 20% increase in the fee, and British Columbia have put restrictions on foreign home buyers.

On the other hand, Trudeau is facing backlash for blaming foreigners for Canada’s soaring property prices.

In an interview, Mike Moffatt, senior director for policy and innovation at the Smart Prosperity Institute, said, “This is kind of scapegoating that, ‘Oh, it’s foreigners ruining Canada’s housing market and this is going to put it back in the control of Canadians.’” He said that he was worried about the way things were being said, even though the administration had, for the most part, been careful about how it put things together.

“There’s a lot of talk here,” Moffat continued, “but I’m not seeing too much that is really going to move the needle.”

Paul Kershaw, a professor at the School of Population and Public Health at the University of British Columbia, says that policies that encourage people to use their homes as investments are making property prices go up.

Kershaw has been advocating for new public investment vehicles to encourage Canadians to divert more of their retirement and other assets away from housing. To encourage more people to enter the home market, he proposes that the government decrease income taxes while raising property wealth taxes.

“Everyday Canadians, myself included, are entangled in perpetuating our unsustainable, unaffordable housing system,” said Kershaw, the founder of Generation Squeeze, which advocates for intergenerational fairness.

Foreign investors, he added, do play a role in Canada’s housing affordability problems, but he called blaming outsiders the “low-hanging policy fruit.”

“Because they are not large voting blocks, politicians find it easy to point to these ‘villains’ rather than engage with the hard truth that many everyday, often older, homeowners are implicated in the problem,” he said.

According to Moffatt, the Bank of Canada’s policy is significantly more likely to affect home affordability than any government measure.

The central bank, like many others around the world, has just begun an aggressive rate-hiking cycle to combat inflation.

“I do think this market is going to cool down quite a bit, but that’s going to be more the Bank of Canada’s doing than anything else,” Moffatt said. “The government has positioned itself to be able to take credit for price reductions, even if none of these policies really, on the demand side, change all that much.”

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