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The federal government’s ban on foreign nationals and companies owning housing in Canada has not materially lowered prices or boosted the inventory of real estate on the market, says Royal LePage president and CEO Phil Soper, in a new report.
Since Jan. 1 2023, foreign commercial enterprises and people who are not Canadian citizens or permanent residents have been prohibited from buying residential property. In February, Finance Minister Chrystia Freeland announced an extension of the two-year ban until Jan. 1, 2027, saying the move would “ensure houses are used as homes for Canadian families to live in and do not become a speculative financial asset class.”
Economists and realtors have criticized the government’s hardline stance, pointing to “an immaterial share of home purchases,” and the need for more supply amid a surge in population.
In a report released on Thursday, Royal LePage found the ban has not had a material impact on prices or available inventory. However, the firm notes demand has fallen as a result in some affluent markets.
“Two years in, and the prohibition on foreign buyers has had virtually no impact on housing prices in Canada, as we expected. Prolonging the international buyer ban will not make housing more accessible to Canadians,” Soper stated in the report. “Upward pressure on prices will continue as long as supply fails to meet the demand for homes.”
On Monday, Freeland announced changes to certain mortgage rules as part of the government’s push to improve housing affordability and incentivize construction.
Soper notes foreign buyers tend to focus on the luxury real estate market, as it’s often wealthy individuals who consider owning a property in a foreign country. He sees this segment of the real estate market as less likely to be swayed by changes to lending rules and interest rates.
“Many buyers in the luxury market segment do not require high-leverage mortgages,” he wrote. “It is common to see expensive homes purchased with very substantial down payments, or even fully in cash.”
According to Royal LePage, prices for luxury real estate in Canada’s largest markets have remained stable compared to mainstream housing. It found Halifax booked the biggest annualized gain for median prices in the luxury category in the first eight months of 2024, at 8.6 per cent. In Toronto, prices rose 3.9 per cent year-over-year. Vancouver and Montreal saw 1.8 per cent and 2.8 per cent declines, respectively.
Royal LePage says the number of luxury sales climbed in the first eight months of 2024 versus 2023 in all major cities except Vancouver and Toronto.
Jeff Lagerquist is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jefflagerquist.
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