Canada is evaluating opening its real estate market to foreign investment again starting in 2027, while the Government looks for ways to increase the supply of affordable housing. He Housing Minister Gregor Robertsonconfirmed that the existing ban on the purchase of homes by foreigners will be maintained until 2026, a measure approved by the previous Executive of Justin Trudeau. Over the next year, its effectiveness will be reviewed and models from other countries will be studied.like Australia, to define what the appropriate role of foreign capital should be.
Robertson said the government’s priority is to ensure housing is built and maintained for Canadians, although he acknowledges there is potential to allow foreign investment in new high-end housing or rental housing projects. Robertson stressed that countries like Australia have found ways to allow some level of external investment without triggering excessive increases in house prices.
The 2023 Canadian ban prevents foreigners from buying ‘non-vacation’ homes (non-recreational homes), a measure adopted after prices skyrocketed due to extraordinarily low interest rates. Subsequently, adjustments were made to allow investments in empty land under development. Still, many developers have criticized that the ban limits access to capital needed to build new homes.
In contrast, Australia It prohibits the purchase of homes by foreigners, but does allow the purchase of new units and on empty land. These rules seek to balance prices and stimulate construction. Although the country shows an increase in construction starts, it still faces difficulties in achieving its building goals.
In Canada, figures in the sector have proposed tax changes that facilitate the attraction of foreign capital. However, Robertson notes that it is premature to go into details and that any decision will depend on the market situation in a year.
The available data indicate that Foreigners owned less than 5% of properties in Canada’s major markets in 2020. Furthermore, price increases during the pandemic are mainly linked to interest rates close to zero. Following the start of the Bank of Canada’s rate hike cycle in 2022, demand slowed and prices began to fall, recording an 18% decline from their peak, one of the steepest corrections in decades. Despite this, cities like Toronto and Vancouver remain inaccessible to many buyers.
The Federal Housing Agency estimates that Canada needs to nearly double construction to achieve between 480,000 and 500,000 new homes per year by 2035.
Although the pace of construction has shown signs of slowing, starts remain above last year’s levels thanks to government incentives for rental housing construction. Robertson, who was mayor of Vancouver for a decade, has experience dealing with the impact of foreign investment. In 2016, the province implemented a tax on international buyers which temporarily reduced sales, although prices then continued to rise.
The new minister has also received criticism for stating that the Government should not intervene to force prices down. He explained that his goal is to increase the supply of affordable housing, especially through ‘Build Canada Homes’, which has an initial budget of 13 billion Canadian dollars (8,042 million euros at the current exchange rate). According to him, the majority of the homes built by this organization will be used mainly for affordable rentals.
The Canadian market presents large regional differences: Toronto and Vancouver strong difficulties are faced, especially in the apartment segment, while Montreal and cities of Alberta show greater stability. An analysis by the parliamentary budget control body estimated that Build Canada Homes would produce about 26,000 units in five yearsa modest 2.1% increase over current projections. Robertson responded that this calculation does not consider incentives to attract private capital. According to the minister, there is an important opportunity to involve pension funds and banks in long-term, low-risk investments focused on affordable housing.
