Canada bans foreigners from buying property after spike in home prices

Ottawa (Canada), January 2: Canada on Sunday banned foreigners from buying residential properties after the spike in home prices since the pandemic started, CNN Business reported.

The Canadian government enacted this law as home prices skyrocketed following the outbreak of the pandemic, and some politicians believed that buyers were to blame for snapping up the supply of homes as investments. This past year, the campaign website of Australian Prime Minister Justin Trudeau's party stated that the desirability of Canadian homes is attracting profiteers, wealthy corporations, and foreign investors.

"This is leading to a real problem of underused and vacant housing, rampant speculation, and skyrocketing prices. Homes are for people, not investors," the campaign site read.

According to CNN Business, an exception has been made in the law for non-citizen immigrants and permanent residents of Canada.

However, the sharp increase in home prices in 2020 and 2021 was already reversed by 2022, well before the law went into effect. According to the Canadian Real Estate Association, average home prices in Canada peaked just above USD 800,000 in February and have since fallen steadily, dropping about 13% from that peak.

Canadian Bank is also to blame for price increases as they are raising the interest rates, resulting in higher mortgage rates in the country, just like in the United States and other countries that have been hiking rates.

The Canadian Real Estate Association's (CREA) price index is still up 38% from the end of 2019, prior to the pandemic, but the group claims that inventory of homes for sale has returned to pre-pandemic levels, according to CNN Business.

Even with the exemptions for people planning to move to Canada, the real estate association expressed concern about the law. The group stated in a statement that Canada has earned a reputation as a multicultural nation.

"As currently proposed, the prohibition on the purchase of residential property by non-Canadians can impact our reputation as a welcoming nation. The potential benefits of the ban are likely to be modest."

According to CNN Business, CREA is also concerned that the ban will prompt retaliation by the United States and Mexico, which will prohibit Canadians from purchasing property in those countries, particularly retirees looking for winter homes away from the Canadian winter.

The group also stated that they buy vacation and residential properties in a variety of countries, particularly the United States.

According to CREA, Canadians are the largest foreign purchasers of American real estate, accounting for more than half of all purchases in Florida and Arizona.