Changes: The Foreign Buyer Ban Rule In Canada
As a mortgage broker in Calgary, we understand that keeping up with the latest updates and regulations can be daunting, especially with the recent publication of the federal ban on foreign buyers starting on January 1, 2023. This new regulation has left many homebuyers, sellers, and investors confused and looking for answers. Here is what we know so far about the Foreign Buyer Ban Rule in Canada:
1. Cities/Areas affected: It is not yet clear which cities and areas this ban applies to, whether it is only those that are part of a census agglomeration or census metropolitan area. However, we anticipate that more clarification will come soon.
2. Contract entered before January 1, 2023: The act allows for an exemption if the non-Canadian assumes liability under an agreement of purchase and sale before January 1, 2023. However, it is not clear if the contract has to be subject-free or not. We are still waiting for final verification from the government.
3. Who can buy: The ban has a number of exemptions, including certain temporary residents, those with work permits, diplomats, refugees, and a few others.
4. Other exemptions: There may be exemptions for rental units, properties acquired through foreclosure, spousal separation, and inheritance. We are waiting for further clarification from the government.
5. Income and Taxation: We also need clarification on whether someone who has claimed taxes in Canada in 2021 would be exempt or not. Furthermore, what about someone who would be filing Canadian Tax for the first time in 2022.
6. Foreign corporations: Foreign corporations are not permitted to buy real estate in Canada under the ban.
Foreign Buyer Ban Rules Amended in March 2023
The federal government amended the regulations of the Prohibition on the Purchase of Residential Property by Non-Canadians Act on March 27, 2023. The amendments include the following:
- Work permit holders are now allowed to purchase homes in Canada.
- Vacant land is no longer subject to the foreign buyer ban.
- Non-Canadians are now allowed to buy residential property for the purpose of development.
- The corporation foreign control threshold has been increased from 3% to 10%.
The amendments are intended to make housing more affordable for Canadians and to encourage foreign investment in the Canadian economy.
In addition to the above, the following are some other key points to keep in mind about the foreign buyer ban:
- The ban applies to all residential property, including single-family homes, condos, and townhouses.
- The ban does not apply to commercial property or to property that is being used for a business purpose.
- The ban does not apply to Canadian citizens or permanent residents.
- The ban is enforced by the Canada Revenue Agency (CRA).
If you are a non-Canadian who is considering buying a home in Canada, you should be aware of the foreign buyer ban. You should also consult with an expert to ensure that you are in compliance with all applicable laws.
As you can see, there are still many unknowns, but we are working hard to get as much clarity as we can. We encourage our clients to keep themselves informed about this new Act and Regulations by visiting the Government of Canada’s website at https://laws-lois.justice.gc.ca/eng/acts/P-25.2/page-1.html.
While this ban may mean more opportunities for Canadians in cities that tend to see more foreign buyers, it may have a significant impact on those looking for foreign investment. If you are a real estate investor trying to get foreign investment, you need to be completely clear on how this new legislation will affect you.
The Foreign Buyer Ban Rule in Canada is still new, and some things will have to be tested before we know for sure how it will affect the real estate industry. We anticipate that more clarification will come in due time, but until then, we will continue to provide our clients with the latest information to help them navigate these changes successfully.
If you’re looking for a mortgage broker, consider reaching out to Keith Uthe Demystifying Mortgages. Unlike an agent in the bank, we represent you, the client, too many different lenders to find you the best terms for your mortgage and make sure you understand what those terms mean. This should be as important as the rate when making your borrowing decision. As a home buyer, this is the single largest investment and borrowing decision you will make at any one time, and you should have someone independent of the lender in your corner looking out for you. This is why you need to be considering more than just the mortgage rate ensuring your mortgage offers you flexibility and freedom at minimal cost for those unexpected moments that happen in life.
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(403) 614-8843 or email us at keith@enrichmortgage.ca.