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Canada’s government is banning foreigners from buying homes there for the next two years in an attempt to control runaway housing prices.
The government also will provide billions of dollars in construction funds to add more affordable housing stock and introduce legislation to allow Canadians under age 40 to save up to C$40,000 tax-free toward a down payment on a house.
The measures were included in the finance ministry’s proposed budget released last week.
Students, foreign workers, and foreigners who are permanent Canadian residents are exempt from the ban.
“I don’t think prices are going to fall as a result [of the ban], though I do think it takes away at least some of the competition in what is the most competitive market in Canadian housing history,” Simeon Papailias, founder of real estate investment firm REC Canada, said to Bloomberg.
“I don’t think a two-year band-aid is going to have an impact on what’s a fundamental lack of supply,” he added.
The moves are seen to reflect the Trudeau administration’s concern about political unrest sparked by inflation, particularly in home prices.
Canada’s housing market is among the world’s most costly, according to Bloomberg.
The cost of houses in Canada has rocketed up more than 50 percent since 2019 and set a record monthly rise in February; buyers grabbing homes ahead of the Bank of Canada’s pending interest rate increase drove the median home price to C$869,300, about $693,000 in U.S. dollars.
In contrast, the median U.S. listed home price in March was $405,000, according to Realtor.com.
Also, prices have risen as a result of “blind bidding,” which keeps bids secret when a seller is entertaining offers for a house.
The Trudeau administration has taken a stand against the practice and the Canadian Real Estate Association has stopped defending it.
The association is beginning a pilot project that will list offers in real time for properties listed on its website.
TREND FORECAST: As with most of the housing markets around the world, when interest rates rise to levels where it becomes too costly to borrow, housing markets will sink into correction territory…down some ten percent.
And should the Ukraine War continue and others follow, inflation will keep spiking higher as commodity prices rise and product shortages continue.