'Prolonging the ban will not make housing more accessible to Canadians'
The federal government's ban on foreign ownership of Canadian housing has failed to materially lower prices or increase market inventory, according to a recent report from Royal LePage.
Despite its intent to make housing more affordable for Canadians, the ban has not brought the anticipated changes to the real estate market, said Phil Soper, president and CEO of Royal LePage.
The ban, which came into effect in January 2023, was initially set for two years but was extended by finance minister Chrystia Freeland until January 1, 2027. The ban aims to prevent housing from becoming a speculative financial asset and to ensure homes are available for Canadian families.
However, economists and realtors have criticized the ban, arguing that foreign buyers make up a small portion of overall home purchases, and the real issue lies in the shortage of supply.
“Two years in, and the prohibition on foreign buyers has had virtually no impact on housing prices in Canada, as we expected,” Soper said in the report. “Prolonging the international buyer ban will not make housing more accessible to Canadians.”
While the ban has not materially impacted prices or inventory, it has led to decreased demand in some affluent markets. This finding contradicts Freeland’s stance that the ban would prevent houses from becoming "a speculative financial asset class."
Foreign buyers typically focus on luxury real estate, a segment less affected by lending rules and interest rate changes. “Many buyers in the luxury market segment do not require high-leverage mortgages,” Soper said. “It is common to see expensive homes purchased with very substantial down payments, or even fully in cash.”
According to Royal LePage, prices for luxury real estate have remained stable compared to mainstream housing, with the largest gains seen in Halifax, where median prices for luxury homes rose 8.6% in the first eight months of 2024. Toronto saw a 3.9% increase, while Vancouver and Montreal experienced slight declines of 1.8% and 2.8%, respectively.
Soper pointed out that Canada’s housing market is primarily driven by domestic buyers, both in the luxury market and other segments. The ongoing supply shortage, not foreign ownership, continues to push prices upward.
Read more: Is Canada’s extended ban on foreign buyers the right move?
“Inventory shortages in Canada's housing market are not limited to entry-level asset classes. With a vast majority of buyer interest coming from Canadians, be it in the luxury market or elsewhere, upward pressure on prices will continue as long as supply fails to meet the demand for homes.”
Earlier this week, Freeland announced adjustments to mortgage rules aimed at improving housing affordability and encouraging new construction. However, Royal LePage’s report suggests that until supply issues are addressed, these measures, like the foreign buyer ban, will have limited impact on making homes more affordable.
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