Among the many budget measures to make housing more affordable is a two-year ban on sales to foreign buyers. But details are scarce.
Soaring real estate prices, the second most popular topic of conversation among Canadians after the weather, loomed large in the federal budget presented to Parliament on Thursday by Chrystia Freeland, the finance minister and deputy prime minister. Over the two years ending in February, the average house price increased by more than 51 percent, to 868,400 Canadian dollars, according to the Canadian Real Estate Association. Among the wide array of budget proposals aimed at making housing more affordable is a two-year ban that will block most foreigners and non-Canadian companies from buying residential real estate in the country. The idea that foreign money has helped push up prices in markets like Vancouver and Toronto has been around for some time and has become a hot political issue. And there have been efforts to discourage it. In 2016, British Columbia introduced a 15 percent tax on home and condo purchases by foreign buyers. Late last month, Ontario raised its own tax to 20 percent and extended it to cover the entire province. But several economists I spoke with after the budget’s release have said the effect of foreign buyers on prices is not as significant as many people may believe, even in Vancouver and Toronto. And some of the experts warn that the ban will most likely create headaches of its own — perhaps big ones. Tsur Somerville is an associate professor at Sauder School of Business, University of British Columbia, who specializes in real estate economics. He told me that the housing price increase that took place during the pandemic contradicts the assumptions underlying this ban. “We’ve had two years when it’s been very hard to be a foreign buyer of real estate in Canada because it’s been hard to get here,” he said. “Yet this is when house prices have had their largest increase over the last 10 years.” Research by Professor Somerville and a colleague revealed that after British Columbia imposed its tax, prices fell by just 3 to 5 percent in Vancouver neighborhoods that were popular with foreign buyers compared with neighborhoods such buyers avoided.
