The Government of Canada has implemented a new law to help make homes more affordable for Canadians. The Prohibition on the Purchase of Residential Property by Non-Canadians Act was put in effect on January 1, 2023, and will prevent non-Canadians and corporations controlled by non-Canadians from purchasing residential property in Canada for a period of two years.
According to the Act, residential property is defined as buildings with three homes or fewer, as well as parts of buildings such as semi-detached houses and condominium units. The law does not prohibit the purchase of larger buildings with multiple units.
The Act also includes a $10,000 fine for any non-Canadian or anyone who knowingly assists a non-Canadian and is convicted of violating the Act. If a court finds that a non-Canadian has done this, they may order the sale of the property.
In the lead up to the implementation of the Act, the Government of Canada conducted a consultation period during which it received approximately 200 written submissions from individuals and stakeholders. The accompanying regulations for the Act will also come into force on January 1, 2023, and the Act and its regulations will be repealed after two years.
What Is A Non-Canadian According To This Law?
The Act defines a non-Canadian as an individual who is not a Canadian citizen, a permanent resident of Canada, or a person registered under the Indian Act. Corporations based in Canada that are privately held, not listed on a stock exchange in Canada, and controlled by a non-Canadian are also included in this definition.
The Act applies to direct or indirect purchases of residential property, including purchases made through partnerships, trusts, or other entities seeking to avoid the prohibition. There are some exceptions to the prohibition, such as when someone acquires an interest in a residential property through divorce, separation, gift, or death, or when a dwelling unit is rented to a tenant for the purpose of occupation.
The Act will apply to residential property located in census metropolitan areas and census agglomerations, as well as vacant land that is zoned for residential use or mixed-use and located within these areas.
What Will Be The Impact Of The Prohibition On The Purchase Of Residential Property By Non-Canadians Act?
The goal of the Prohibition on the Purchase of Residential Property by Non-Canadians Act is to ensure that the housing market in Canada remains available and accessible to Canadians.
The Act is intended to help make homes more affordable for Canadians by preventing non-Canadians from purchasing residential property in Canada for a period of two years.
There are several factors that can impact real estate prices in Canada, including demand, supply, and economic conditions. All else being equal, the Act will lead to a reduction in demand for residential property in Canada. However, it is important to note that the Act only applies to a relatively small segment of the market, as it only covers the purchase of residential property by non-Canadians.
That said, combined with a grim economic outlook and a rise in interest rates which will simultaneously reduce demand and increase supply, Canadian homeowners should feel the negative impacts while Canadian home seekers should feel the positive impacts.
Source: CMHC
