The change came into effect on 1er January, when we wished each other a happy new year by clinking our glasses.
From now on, foreign buyers will no longer be able to buy a residence in Canada for a period of two years.
“Houses should be homes for Canadians, not investment vehicles for foreigners,” said Chrystia Freeland.
It is difficult to contradict the federal Minister of Finance on this. But don’t count too much on the new law to suddenly make the house of your dreams currently displayed at a crazy price on Centris affordable.
Because according to the opinion of specialists, this measure will have very little impact on property prices, particularly in Quebec.
In January 2022, in Quebec, barely 0.9% of real estate transactions were made by a buyer who provided an address located outside of Canada. On the island of Montreal, it was 2.8%, according to figures contained in the last provincial budget.
These figures are imperfect and do not capture everything, with some foreign buyers using a local address. But we see that the phenomenon is limited.
Of course, these are averages. In very specific market segments, such as condos located in downtown Montreal or on L’Île-des-Sœurs, the share of foreign buyers is higher. In these cases, it is possible that the new law contributes, to some extent, to rebalancing supply and demand. Studies have shown that in Toronto and Vancouver, taxes on foreign investment and on unoccupied housing have helped1.
However, let us realize that many of the transactions carried out by those who are called “outsiders” will continue to be permitted. Temporary residents, refugees, spouses of Canadians living abroad will still be able to buy property in the country – and that’s normal. In the end, the number of transactions that will be prevented is likely to be quite small.
The idea is not to denounce the law. One can even wonder why the federal government was slow to adopt it, waiting for real estate prices to decline because of the rise in interest rates to react.
But you have to realize that strangers are an easy target. In truth, they have little to do with the fact that homes have never been so unaffordable since the 1980s in Canada. The main causes are elsewhere.
We have already written: if people are struggling to find a house or rent at a reasonable price, it is because there is a lack of houses. It is therefore necessary to take out the hammers to build them.
On this front, the federal government is saying the right things. In the last budget, a new fund of $4 billion was announced to accelerate housing construction. We are talking about simplifying the approval process for municipalities. To promote densification. To “address the step syndrome in my backyard”. To develop around public transport networks.
The right words are there, but the challenge will be to turn them into results – a weakness of the Trudeau government. In the past, federal housing funds have been used to build high-end units, which does little to address the affordability problem.
Another downside: the fund aims to accelerate the construction of 100,000 housing units by 2024-2025, while the Canada Mortgage and Housing Corporation (CMHC) calculates that 3.5 million would be needed. here 2030. We are far from the mark.
It is by pulling out the hammer and truly stimulating massive housing construction that we will enable Canadians to find an affordable home. Fighting scarecrows that have little to do with high prices will be largely insufficient.