Canada is often touted as one of the best countries to live in. But the North American nation is set to take drastic measures against rapidly escalating home prices and related issues regarding the affordability of housing for its people.
Prime Minister Justin Trudeau recently proposed barring foreign nationals from buying houses in Canada for at least two years. This is based on the assumption that the influx of foreign immigrants and permanent residents has considerably jacked up home prices.
Indeed, the average price for a house in Canada has soared by nearly 20%, pegging the cost at around US$650,000 or nine times the standard household income.
Experts Weigh In
However, information regarding real estate purchases or investments made by foreigners in Canada is relatively sparse. So experts say that they might not be why it’s getting more expensive to buy a home. In which case, Trudeau’s proposed ban is probably a Band-Aid solution for a severe issue.
According to Toronto-based advisory firm Bullpenn Research & Consulting, foreigners only made up 1% of all real estate purchases made in 2020. That’s considerably lower than the 9% registered in 2015 and 2016.
Bullpenn president Ben Myers opines that the escalating cost of residential real estate reflects Canada’s recent spike in population growth. Moreover, homes are short in supply given highly restrictive rules on construction and development.
The ongoing pandemic also impacted the issue. When COVID first hit Canada in 2020, policymakers chose to lower interest rates and decrease borrowing costs to stabilize the economy. Unfortunately, this also led to an increased demand for housing.
On a political level, Trudeau’s proposed ban is seen as a way of keeping the promise he made during the last electoral campaign to make housing more affordable for Canadian citizens.
The ban may also include several bidding processes that have long favored those who buy houses as an investment instead of an actual residence. Indeed, one out of five homes sold in Canada since 2014 was purchased as an investment rather than an existing dwelling.
But not all foreigners seeking to live in Canada will be covered under the proposed ban. Those exempted are permanent residents, international students, workers, first-time homebuyers, or those buying a primary residential address.
Along with the ban on foreign homeownership, the Canadian government has allocated a considerable sum for infrastructure. It has also proposed several new programs related to housing, including the creation of tax-free savings accounts for first-time homebuyers.