Temporary residents in Canada may still be able to buy a house despite the new law in Canada.
The law banning non-Canadians from buying property was passed in June last year, 2022, in the Canadian Parliament and has been in effect since January 1st of this year.
In broad terms, the new regulations prohibit the purchase of residential property by foreign investors who are neither Canadian citizens nor permanent residents. These regulations will be in place for two years and will then be automatically repealed.
This new law specifically prohibits foreign investments in Canadian real estate, and individuals who are neither Canadian citizens nor permanent residents will not have the right to own non-recreational residential properties in Canada.
Residential properties include detached houses, semi-detached houses, houses with shared walls and ceilings with neighbors, condominium units, and similar properties.
The Canadian government introduced this law as part of the 2022 budget as a strategy to reduce housing costs, which have been on the rise in recent years.
Data from the Canadian Real Estate Association (CREA) shows that the average price of a home in February 2022 was $816,720. This figure dropped to $632,802 in November 2022. However, this figure is still considered high, making homeownership out of reach for many, as the average income in Canada in 2021 was $58,800.
The government attributes this increase in housing prices to foreign investors who buy properties in Canada but never live in them.
Which exceptions apply?
This new law does not completely prohibit the purchase of a house by foreign investors. Foreign investors are still allowed to purchase recreational properties such as cottages and vacation homes. Properties with more than three units are also eligible for purchase by foreigners.
Additionally, this law does not apply to houses located outside of major urban statistical areas (i.e., populations exceeding 100,000).
It is also worth noting that non-Canadians who purchase a house with a Canadian spouse and later, for example, go through a divorce, or non-Canadians who inherit a house in Canada after the death of their spouse or relatives, are also exempt.
Can temporary residents buy property in Canada?
This law does not apply to Canadian citizens and permanent residents. Temporary residents with a valid work visa or study visa in Canada can also purchase a house. However, there are several conditions for them as the government requires proof of intention and commitment to permanent residence and settlement in Canada.
For example, an individual enrolled in an eligible program or course at a designated Canadian educational institution must meet at least one of the following criteria:
– Have filed all income tax returns under the Income Tax Act for each of the five taxation years preceding the year in which they intend to purchase a house;
– Have been physically present in Canada for at least 244 days during each of the five calendar years preceding the year in which they intend to purchase a house;
– The purchase price of the residential property does not exceed $500,000;
– Have not purchased more than one residential property.
This means that anyone in Canada on a study visa who wants to buy a house must be able to prove that they have been physically present in Canada for at least 244 days each year over the past five years. They must also provide evidence of filing tax returns in Canada during the specified timeframe.
It is also worth mentioning that the price cap of $500,000 for purchasing a house is unlikely to be realistic for buying a house in Ontario or British Columbia, where the average house prices are still well above $800,000, and the housing crisis in these two cities is very severe.
Those who are present in Canada on a valid work visa must also meet the following conditions:
– Have worked in Canada for at least three years in the four years preceding the year in which they intend to purchase a house, if their work was full-time as defined in Section 73(1) of the Immigration and Refugee Protection Regulations;
– Have filed all required tax returns for three years from the four years ending before the year in which they intend to purchase a house;
– Have not purchased more than one residential property.
For individuals on a study visa, the time spent in Canada is generally less than the required time for those who are studying in Canada. However, holders of work visas still need to demonstrate that they have worked full-time for at least three years and have filed tax returns for the four years prior to the purchase.
This law also states that non-Canadians must prove their eligibility to real estate agents. Temporary residents must bear all costs associated with proving their eligibility, such as document fees for work visas and assessment reports. They must also demonstrate their physical presence in Canada through lease agreements, payment documents, building invoices, or entry and exit documents from Canada.
What are the penalties?
Foreign investors who find ways to bypass the ban on buying residential property in Canada or anyone who knowingly assists them can be fined up to $10,000. Additionally, the provincial superior court where the property is located may issue an order for the sale of that property.