A two-year ban on some foreigners buying homes in Canada has come into effect as part of measures to help ease one of the most unaffordable housing markets in the world.
As of this summer, the average home price in Canada is C$777,200 ($568,000; £473,700) – more than 11 times the median household income after taxes.
Some have been critical of the ban, saying it is unclear what impact it will have on Canada’s housing market.
Non-Canadian residents make up less than 6% of homeowners in Ontario and British Columbia, where national statistics indicate home prices are the highest.
As of 1 January, the ban prohibits people who are not Canadian citizens or permanent residents from buying residential properties, and imposes a C$10,000 fine on those who breach it.
In late December – 11 days before the ban came into effect – the Canadian government announced some exemptions to the regulation, including for international students who have been in the country for at least five years, refugee claimants and people with temporary work permits.
In a statement, federal housing minister Ahmed Hussen said the ban is meant to discourage buyers from looking at homes as commodities instead of a place to live and grow a family.
“Through this legislation, we’re taking action to ensure that housing is owned by Canadians, for the benefit of everyone who lives in this country,” Mr Hussen said.
Why it takes 30 years to buy a house in Canada
While housing prices in Canada dipped slightly in 2022, they remain much higher than a decade ago.
Housing prices were up 48% last year compared to 2013, when the average price of a home was C$522,951.
Meanwhile, the average household income for Canadians has struggled to keep pace to rising home prices. The latest data indicates the median after-tax household income grew 9.8% from 2015 to 2020.
These numbers set Canada’s housing market up as one of the most unaffordable in the world, ranking the country higher than New Zealand, the US and the UK, according to a Statista analysis of house-price-to-income ratios.
The average home price in two of Canada’s largest cities – Toronto and Vancouver – has topped the C$1m mark, often putting them at the list of top 10 most unaffordable cities in the world.
New Zealand passed a similar legislation banning foreign homebuyers in 2018 as the country grappled with its own housing affordability crisis.
However, inflation-adjusted home prices have continued to rise since the ban came into effect.
Other countries have enacted different measures to curb foreign homeownership, including by implementing designated restricted zones where non-residents are barred from purchasing homes, or bringing in specific fees on foreign buyers.
According to the Prohibition on the Purchase of Residential Property by Non-Canadians Act, a residential property includes detached homes or similar buildings, as well as semi-detached houses, rowhouse units, residential condominium units and other similar premises.
The legislation applies to residential properties that are located in a census metropolitan area or a census agglomeration, says the Canada Mortgage and Housing Corporation (CMHC). A census metropolitan area has a total population of at least 100,000 people, with at least 50,000 living in its core, while a census agglomeration has a core population of at least 10,000 people. The regulations also apply to vacant land that does not have any livable dwellings but is zoned for residential or mixed use.
Homes in municipalities with a core population of less than 10,000 are not subject to the ban, nor are recreational properties such as cottages and lake houses. Additionally, the law does not explicitly ban the purchase of larger buildings with multiple units.
Although the legislation targets non-Canadians, there are some exceptions. Those in Canada with temporary work permits are still allowed to buy residential properties, as are refugee claimants and international students who meet certain criteria.
The ban does not apply to those who are Canadian citizens or permanent residents, nor does it apply to non-Canadians who are looking to rent a residential property in Canada.
Non-Canadians with a spouse or common-law partner who is a Canadian citizen, permanent resident, person registered under the Indian Act or refugee are also exempt from the ban.
WHAT HAPPENS TO THOSE WHO BREAK THE RULES?
Non-Canadians who violate the ban can be fined up to $10,000 and may be required to sell the property they purchased. Those who knowingly assist a non-Canadian with their purchase can also be fined.