Canada’s foreign home buyers ban is unnecessary and has had little impact on the cost or supply of homes in the country, real estate franchise Royal LePage said.
The foreign buyer ban -- which was first put into effect Jan. 1, 2022, for one year and later extended to Jan. 1, 2027 -- prohibits non-Canadians from purchasing real estate in the country as a bid to ease high costs in the housing market.
While certain exceptions exist, the legislation has banned foreign citizens and foreign commercial enterprises from purchasing residential property in the country for years. However, Karen Yolevski, COO of Royal LePage, said that the ban has had virtually no impact on home costs or supply.
“We really haven’t seen this ban have an impact on any segment of the market, whether it be condominiums or luxury properties,” Yolevski said in an interview with BNNBloomberg.ca Friday.
“…It’s not driving down prices of luxury homes, it’s not impacting supply or price of more modest homes, again it’s the interest rate changes that have done that. It’s not having the desired impact of the policy, and therefore we would say it’s an unnecessary policy and an unnecessary ban.”
Yolevski estimates that foreign buyers were represented in the low single digits of buyers in Canada. She said that there was not a lot of buying activity, aside from demand from foreign buyers looking for investment properties such as those with children going to school in Canada, or buyers looking for real estate in cottage country.
“What we had seen prior to the ban was two things: one, we have a lot of demand for housing, a lot of immigration and a lot of people looking to buy homes for new youth, for investment, and we didn’t have enough supply,” she said. “We simply weren’t building homes fast enough and putting homes on the market to satisfy that demand.”
With interest rates dropping during the pandemic, a lot of people purchased homes. It wasn’t until rates started to rise again in 2022 that sales activity then dropped.
“When interest rates started to rise in 2022, we saw (an) instant dramatic impact on sales activity – sales activity dropped essentially overnight, people pulled back and said ‘okay, rates are going up, that makes houses more expensive, maybe prices will go down, maybe this isn’t the right time.’”
However, removing foreign ownership has not had an impact on sales or supply, Yolevski said.
“We don’t believe that the ban on foreign ownership has had an impact on supply, so putting more supply in the hands of Canadians or impact pricing in terms of making homes more affordable, by taking out foreign ownership, we have not seen either supply go up or prices go down.”