Foreign BUyer Ban: Prohibiting Non-Canadians From Buying Residential Real Estate (update)
This article is an update about amendments to the act, which we talked about in a previous post. On January 1, 2023, the federal government introduced legislation that restricted foreign homebuyers from buying residential properties in Canada. Determined to mitigate rising real estate costs throughout Canada, The Prohibition on the Purchase of Residential Property by Non-Canadians Act banned foreign buyers from purchasing all residential properties from detached and semi-detached homes to townhouses, condominiums, and strata units in metropolitan areas. This ban is sometimes being called foreign buyer ban.
At the time of the initial foreign buyer ban, Jacob actually provided an article detailing the 2 year ban on non-Canadians purchasing residential real estate. This article is a follow-up to that story as there was an amendment to the foreign buyer ban. Below you’ll find these new amendments to the act.
More recently, the Government announced amendments to the Act that were set to come into effect on March 27, 2023. As Vancouver real estate is sure to be impacted by these changes, as your local real estate agent, Jacob wanted to outline the amendments. There are four central amendments to the Act that are likely to impact home sales in Metro Vancouver:
- Change to restrictions on temporary workers.
- Clarification on the definition of ‘residential property.’
- Exceptions for property development.
- Changes to the definition of ‘foreign control of direct or indirect ownership.’
Let’s take a closer look at each of these changes to get a better idea of how they may impact the Metro Vancouver real estate market.
AMENDMENTS TO THE ACT RELATED TO TEMPORARY WORKERS
Amendments to the Act should allow temporary workers to purchase residential property under more circumstance. Under the new regulations, temporary workers are permitted to purchase residential property providing they have a valid work permit and are allowed to work in Canada and those permits are valid for at least 183 days at the time of property purchase.
However, temporary workers are restricted to purchasing only one residential property. Additionally, under the previous regulations in the Act, temporary workers were only allowed to purchase residential property if they had worked in Canada and filed associated tax returns for a minimum of 3 years. This requirement has been repealed.
According to the new legislation, Jacob & Jacky anticipate an increase in foreign buyers for homes in Vancouver. However, as a top Vancouver realtor, he does not anticipate a major impact on housing prices. Even before the foreign buyer ban was introduced, foreign investment in residential property in Metro Vancouver real estate was minimal, particularly since 2016 when the British Columbia government introduced a foreign homebuyer tax. In fact, records from 2020 indicate only 4 per cent of residential properties in British Columbia were owned by foreigners.
HOW RESIDENTIAL PROPERTY PURCHASES WILL CHANGE AFTER THE AMENDMENTS TO THE ACT, Foreign Buyer Ban
According to changes to the Prohibition on the Purchase of Residential Property by Non-Canadians Act, the definition of residential property has changed. Under the previous regulations, vacant lots that are zoned for residential or mixed use were not eligible for purchase by foreigners; however, amended regulations allow purchase of this type of property by non-Canadians while also allowing residential development on this land.
While there is unlikely to be a huge increase in foreign investment for these types of properties in Vancouver real estate (partly due to the limited amount of vacant land), there could potentially be an increase in the number of homes or condos for sale in Greater Vancouver neighbourhoods should foreign buyers invest in property for real estate development purposes.
PROPERTY DEVELOPMENT
As the definition of residential property has been amended in the Act, we also take note that new regulations allow foreign buyer to invest in residential properties with the aim of real estate development. Moreover, changes also provide an exception for publicly traded entities formed in Canada but controlled by non-Canadians to purchase residential property for development.
According to the Canada Mortgage and Housing Corporation (CMHC), development includes “evaluating, planning and undertaking of alterations or improvements (with or without a change in use) to a residential property or the land on which the residential property is located and…includes redevelopment of an existing building.” The CMHC further clarifies that leasing or renting an existing property does not constitute development, nor does making repairs, renovations, or remodels. On the other hand, an expansion that is comparable to constructing a new building or a change of use is likely considered development.
Again, this new exception in the Act may impact the availability of homes for sale in Metro Vancouver, though Jacob believes this impact would be minimal. Not only are there relatively few foreign property owners in British Columbia according to statistics, but there is also a significant amount less foreign development happening in Metro Vancouver.
FOREIGN CONTROL OF DIRECT OR INDIRECT OWNERSHIP is affected by the foreign buyer ban
Finally, amendments to the Act more clearly define foreign control of direct or indirect ownership of a publicly traded corporation or entity that is formed in Canada and according to federal and/or provincial laws. In the original Act, Canadian corporations controlled by non-Canadians were deemed to be non-Canadian. With the amended Act, entities formed in Canada with shares listed as Canadian no longer defined as non-Canadian. Further, the amendments clarify foreign control as 10 per cent or more of the value or voting rights of the corporation.
Ultimately, these changes clarify the scope of the original Act while also allowing more foreign families and businesses to invest in residential properties throughout Canada’s metropolitan areas. In many cases, the nuances of this Act may create confusion for non-Canadian individuals and businesses hoping to purchase properties in Vancouver & Greater Vancouver area.
Ultimately, home buyers in Metro Vancouver should look to speak with top Vancouver realtors, to ensure they have the most up-to-date and accurate information on how the Act affects them. Jacob is poised to share his expertise in Vancouver real estate with Canadian and non-Canadian home buyers alike. Contact Jacob today for an in-person consultation.
