(Presidentialwire.com)- As Canada enters the New Year, it has instituted a new rule that will ban all foreign investors from purchasing homes in the country.
On January 1, a new Canadian law went into effect that will essentially serve as a ban on any foreign buyers from purchasing residential properties to serve as investments, for the next two years.
The Canadian government passed the law because home prices in the country spiked dramatically since the pandemic began. Politicians there believed that much of that was due to foreign buyers snatching up many of the supply of residential properties to serve as investments.
Last year, the campaign website for Justin Trudeau, the prime minister of Canada, read:
“The desirability of Canadian homes is attracting profiteers, wealthy corporations and foreign investors. This is leading to a real problem of underused and vacant housing, rampant speculation and skyrocketing prices. Homes are for people, not investors.”
There are exceptions that are provided under the law so that both Canadian permanent residents who aren’t citizens and immigrants will be able to purchase homes in the country.
The controversy surrounding the law is that the huge spike in home prices that happened from 2020 to 2021 already reversed themselves this past year — before this new law ever took effect.
In February of 2022, the average home price in Canada peaked at a high of about $800,000. The Canadian Real Estate Association has reported that prices have steadily fallen since that time, though, going down roughly 13% from that previous peak price.
Part of the reason for the drop in prices is that interest rates have been on the rise in Canada — like they have in the United States — thanks to the Bank of Canada raising them to fight off inflation. Mortgage rates have risen as a result of it, too.
The price index published by the CREA is up 38% compared to the end of 2019, though the organization said that the inventory of available homes for sale has now returned to levels seen before the pandemic.
That being said, the group said that they have concerns about this new law, despite the fact that there are the exceptions in place. In a statement, the CREA said:
“Canada has built a reputation as a multi-cultural nation that welcomes people from around the world. As currently proposed, the prohibition on the purchase of residential property by non-Canadians can impact our reputation as a welcoming nation. The potential benefits of the ban are likely to be modest.”
The group said it’s also concerned that Mexico and the U.S. could potentially retaliate against Canada by passing similar measures of their own that would prohibit Canadians from purchasing homes in their countries.
As the CREA explained:
“Canadians purchase vacation and residential properties in many countries, but particularly in the United States.”
In fact, the largest purchasers of property in America by foreigners are Canadians, with the two most popular states being Arizona and Florida.