Indirect Consequences of Canada’s Foreign Buyer Ban

Published on 29 August 2022, 07:22:56 AM

Indirect consequences of Canada’s two-year foreign buyer ban may be reducing its impact.

The ban has narrowed the pool of foreign buyers Toronto homebuyers traditionally compete with. It’s put the brakes on new rental housing and commercial development throughout Ontario.

That’s causing alarm in Canada’s priciest real estate market, where indirect consequences can play havoc with housing supply.

Quick Read

Why is there a foreign buyer ban in Canada?

What do you mean by indirect consequences?

Can you buy property in Canada if you’re not Canadian?

What regulation is the Prohibition on Purchase of Residential Property by Non-Canadians Act?

What are the disadvantages of foreign investment in Canada?

Just What is the Foreign Buyer Ban 2023?

Why is Canada banning foreign buyers when under four per cent of Ontario properties are  owned by non-residents?

Quite simply, home affordability. Modest homeowners and first time home buyers alike are having a hard time getting into the province’s traditionally red hot housing market. FAQs on the foreign buyer ban. 

While prices have cooled since their 2022 peak, down payments of $200,000 are common for new and resale homebuyers. Freezing out foreign investors by levying a 25% provincial tax and federal foreign buyer ban from 2023 to 2025 gives Ontario buyers a break from speculators who force up home prices. 

Why Banning Foreign Investment in Canada is Tricky

That same effort gives some housing analysts misgivings. 

The foreign buyer ban halts non-Canadian and foreign-controlled entities from buying vacant or developed land without dwellings on it and zoned for residential or mixed use. For Canadian subsidiaries, commercial development could grind to a halt until 2025.

REITs (real estate investment trusts) with three per cent or more foreign ownership are also impacted by the foreign buyer ban. That’s tough on renters who rely on REITs to finance affordable housing and condo developers prevented from using foreign equity.   

The Act goes further. Besides putting foreign-owned housing projects on temporary hold, the ban classifies leases, mortgages, and shares as purchases. That translates into cancelled or delayed contracts for builders and suppliers.

As industry lobbies for changes to keep housing developments afloat, commercial lenders and real estate managers are fielding the fallout.

Who is Exempt From Canada’s Foreign Buyer Ban

Recent immigrants or families who find the measures unnerving can take some comfort in the foreign buyer ban regulations. “The regs”, as they’re called, to the Prohibition on Purchase of Residential Property by Non-Canadians Act exempt:

• International students who have been in Canada most of the past five years. They can buy homes priced up to $500,000.
• Foreign workers who file Canadian tax returns for three out of four years before purchasing property.
• Temporary foreign residents, such as refugees and people fleeing conflict.
• Diplomats and consular staff.
• Employees of international organizations living in Canada.
• And owners of multi-unit buildings with four or more units or recreational property like cabins and vacation homes. 

More on foreign buyer ban Canada exemptions. 

Read the foreign buyer ban regulations. 

Why You Could Owe NRST During the Foreign Buyer Ban

Given the ban, the Ontario provincial government’s October 2022 increase to its non-resident speculation tax (NRST), to 25% from 20%, may seem odd. The province argues federal foreign buyer ban regulations exempt some owners, like foreign recreational property buyers, who would still owe NRST. See if the NRST applies to your property. 

Why You Need a Real Estate Lawyer

With all that, hopeful purchasers exempt from the foreign buyer ban will still need a licenced Ontario lawyer to review and finalize their agreement of purchase and sale. Axess Law ensures offers to purchase Ontario real estate protect your financial and legal interests. What’s in the offer to purchase (Ontario). 

Your Axess Law real estate lawyer reviews your contract for essential clauses that add conditions like a professional home inspection or subject-to financing. We discuss potential amendments with the seller’s lawyer to ensure they are acceptable and advise you if we encounter any obstacles to closing real estate transactions on time. Draft an amendment to agreement of purchase and sale. 

Unless you’re prepared to  accept the risk of losing deposits on house purchases, firm price real estate offers can be ill advised. Accepted offers are legally binding. Foreign buyers face financial penalties and possibly court action for failing to close real estate transactions. Who gets deposits when a buyer backs out. 

Axess Law amends your agreement of purchase and sale to allow it to be canceled by mutual consent. Our licenced real estate lawyers work to ensure you aren’t held financially liable for the difference between what you offered and a final buyer pays. Your buyer’s right to cancel. 

If your deal goes through successfully, your Axess Law real estate lawyer can liaise with your mortgage lender to discharge any existing mortgages you have and finalize new loan obligations. We search title to ensure a property is free of legal claims or construction liens before registering your new home in your name. Legal documents Ontario real estate lawyers require when buying a home.  

Affordable Real Estate Lawyers, Anywhere You Are 

Access lawyers for less in the Greater Toronto Area, Ottawa, or anywhere in Ontario when you buy, sell, or transfer property. Axess Law’s flat fee real estate lawyers are affordable, and our rates are all inclusive (excluding taxes, disbursements, and third-party charges). Axess Law offers you only the legal services you absolutely need. Your final invoice includes no surprises or hidden charges. Your itemized statement of adjustments is explained when we deliver it, and we answer any questions you have about it. 

Hire a real estate lawyer near me. 

Book Legal Appointments Quickly

Axess Law closes real estate transactions without the expense of traditional real estate law firms. Make appointments by dialing our 647-479-0118 lawyer line in Toronto (toll free to 1-877-402-4207) or use our easy online booking form. Our Ontario real estate lawyers can video conference with you anywhere you are or meet at any of our conveniently located Ottawa or Greater Toronto Area law offices. 

Click here to learn more about Axess Law’s real estate law services.