Canada momentarily ban Foreign Purchase of properties for Two years

Canada to ban Nigerians and other foreigners from owning homes for two years as a measure to curtail spiraling costs in the real estate market.  However, foreign students, foreign workers, or foreign citizens who are permanent residents of Canada are exempted from the ban. 

Over the past two years, prices of homes in Canada have jumped more than 50%, with a monthly record increase reached in February. This is as buyers acted ahead of rate increases by the Bank of Canada, taking the benchmark price of a home to C$869,300 ($693,000).

The move signals that Prime Minister Justin Trudeau is becoming more assertive about taming one of the developed world’s most expensive housing markets  and that the government is growing more concerned about the political backlash to inflation and the rising cost of housing.

An earlier measure to curb this rising cost had seen Justin Trudeau’s party during the last election campaign in 2021 suggest a ban on blind bidding for properties.  Blind bidding is the prevailing practice of keeping offers secret when auctioning a home. 

Critics say this practice quickens price increases, with properties occasionally selling for hundreds of thousands of dollars more than the asking price. However, some others argue that the practice encourages potential buyers to make the best offer they can.

The Canadian Real Estate Association has now withdrawn its support for the practice, and on Wednesday it launched a pilot initiative to display real-time offers on properties posted on its own listing website, Realtor.ca.

“I don’t think prices are going to fall as a result, though I do think it takes away at least some of the competition in what is the most competitive market in Canadian housing history,” Simeon Papailias, founder of real estate investment firm REC Canada. 

“I don’t think a two-year band-aid is going to have an impact on what’s a fundamental lack of supply.”

Several billion dollars from Freeland’s budget will go toward affordable housing and assisting local governments to upgrade their procedures so that new houses can be built quickly. 

However, the government is planning additional measures to help new home buyers, ostensibly to boost demand. 

Freeland would introduce legislation that allows Canadians under the age of 40 to save as much as C$40,000 ($31,900) for a home downpayment within a new tax-exempt vehicle, the person said.

The measure will help the country provide billions of dollars to spur construction activity in an attempt to cool off a surging real estate market.