The Act Prohibiting Non-Canadians from Purchasing Residential Property will be in effect for two years beginning January 1, 2023. Non-Canadians are prohibited from directly or indirectly purchasing a residential property under the Act.
The Canadian government enacted this law out of public concern for housing price inflation. Ottawa plans to limit foreign investment in Canada’s housing stock until there is an increase in housing starts. For years, foreign capital has been flooding into Canada to buy residential property. It has sparked concerns about the impact on prices in cities like Vancouver and Toronto. It has also raised fears that Canadians may be priced out of the property market in cities and towns across the country.
Because of higher average property prices and larger mortgage sizes, Toronto and Vancouver have been more sensitive to early interest rate hikes. In June, the number of properties sold in Toronto decreased 41 percent year on year, while home sales in Vancouver fell 35 percent.
Prohibition on the Purchase of Residential Property by Non-Canadians Act does not apply to Canadians or permanent residents. The act forbids non-Canadians from bypassing the restriction by using corporations or other entities to purchase residential property. The act permits the government to clarify the prohibition’s scope and applicability.
After this Act goes into effect, who would still be eligible for a mortgage?
In order to qualify for a mortgage, a person must be a Canadian citizen, a permanent resident, an Indian (as defined in the Indian Act), or other persons as defined in the Act. Non-Canadians are not eligible.
In the Act, who is defined as a non-Canadian?
The act defines a non-Canadian as someone who is not a Canadian citizen or permanent resident. A non-Canadian is also considered “ to be an Indian under the Indian Act.
A non-Canadian corporation would be one that is not incorporated in Canada or one that is incorporated in Canada but controlled by a non-Canadian person or business. A non-Canadian also includes a prescribed person or entity.
Who is exempt from the prohibition on non-Canadians purchasing residential property?
Certain groups of people may be exempt from the purchase prohibition, even though this has not yet been established.
The Government is seeking to provide or clarify current legal exceptions in the regulations. Indigenous peoples, international students on their way to permanent residency, people with work permits in Canada, people escaping international crises and other vulnerable populations, and accredited personnel of foreign missions in Canada are among those who fall into this category.
What happens if a non-Canadian breaches the prohibition on non-Canadians purchasing residential property?
Non-Canadians, as well as anyone who intentionally supports a non-Canadian in breaching the law, are liable to a fine. The fine amounts to $10,000.
Anyone involved in the purchase of residential property should be aware of these regulations, including the clarifying provisions, to guarantee compliance with the legislation and avoid potential fines.
Need a mortgage?
Below you will find links to information about this new act:
Government of Canada: https://laws-lois.justice.gc.ca/eng/acts/P-25.2/page-1.html