When Lucy Hua started her career in real estate a decade ago, most of her clients were foreign buyers. That market dried up after Canada enacted a ban on foreign purchases of residential property in 2023.
And Hua is skeptical those buyers will return, even with a new exemption announced by Ottawa this week.
“I wouldn’t say whether it’s going to work out or not,” said Hua, “Only time will tell.”
On Thursday, the federal government announced that it will allow foreign buyers to purchase residential homes for the first time in years. However, those purchases are limited to new homes.
The strategy comes from Australia and is widely referred to by policymakers as the “Australian model.”
By limiting foreign capital to brand new builds, advocates of the strategy say it keeps foreign wealth away from housing stock on the resale market, which protects Canadian buyers from foreign competition.
At the same time, by limiting foreign money to newly built homes, developers can meet the threshold for financing through pre-sales or sell out projects that are already built. Either way, foreign money allows developers to move on to new projects and increase the housing supply available to Canadian buyers.
“When those condos, those projects, are not selling, those developers cannot move forward with their future projects,” said Hua. “Without those new homes built in our marketplace, we’re not helping with affordability. We’re not helping with accessibility to our local market, to our local residents.”
Yinnon Geva, an assistant professor at the University of Toronto’s Institute for Management and Innovation, questions whether the exemption is really aimed at making housing more affordable for Canadians.
“The federal government is trying to keep the development industry afloat or at least keeping the business going. And the question is, how does this help affordability at the end of the day?,” he said. “We can’t be serious about bringing down prices if we keep propping up demand.”
If foreign buyers take advantage of this exemption, real estate developers could benefit.
Currently, there are thousands of unsold new condos in Toronto and Vancouver. According to RBC, unlike detached homes which finds themselves in a balanced market, the oversupply in condominiums has driven prices down significantly.
But whether foreign buyers will buy these unsold units, or presale units in a new development, is a big unknown.
Despite the exemption, Ottawa is maintaining its ban on foreign purchases of existing residential properties. The ban, which was set to expire in the new year, has also been extended and will now remain in place until 2029.
And Ottawa’s exemption does nothing to address provincial measures that have been enacted to dissuade foreign buyers.
“Across Ontario, we’re looking at 25 per cent foreign buyer taxes,” said Hua. “And in BC, in some specific regions, we’re looking at 20 per cent. So those have not been lifted or exempted.”
