The federal government has overhauled its foreign home buyer ban to ensure that foreigners can buy and develop commercial real estate.
The law, which bans foreigners from buying residential real estate until 2025, was supposed to make it easier for Canadians to acquire homes by stopping competition from outside the country.
Instead, the Prohibition on the Purchase of Residential Property by Non-Canadians Act inadvertently scuttled hundreds of commercial real estate deals and developments, mainly because the law’s definition of residential property included land zoned for residential use or mixed use, which covers large areas of the country’s commercial land.
Now, the federal government has repealed the language in the act so the prohibition does not apply to land zoned for residential and mixed use.
“Vacant land zoned for residential and mixed use can now be purchased by non-Canadians and used for any purpose by the purchaser, including residential development,” said the federal housing agency, Canada Mortgage and Housing Corp., which issued the new rules late on Monday.
The new rules also increase the corporate foreign control threshold. Now, a company is considered foreign-controlled if a non-Canadian owns a minimum of 10 per cent of the entity. The previous threshold was 3 per cent. As well, amended rules allow foreigners to buy residential property to develop.
Residential builder Dorsay Development Corp. said it will now be able to resume investing in and developing properties. The company is based in Canada and owned by a European investor. It has been constructing condo units and townhouses in the Toronto region for 25 years.
Leona Savoie, Dorsay’s senior vice-president of residential, said she was relieved after she passed on dozens of potential acquisitions this year. “I can start to invest again,” she said.
The commercial real estate industry had complained that the law had the effect of halting deals and development because businesses were afraid of running afoul of the law.
The home buyer ban was unveiled in last year’s federal budget when home prices were near their peak and buyers were still able to qualify for a large mortgage. Although national home prices have since dropped about 16 per cent amid higher mortgage rates, the cost of home ownership is well out of reach of many Canadian residents.
It is unclear whether the foreign buyer ban will make it easier for Canadians to own housing. Non-residents owned 7 per cent of all condos in British Columbia and 5.6 per cent in Ontario, according to the most recent data from Statistics Canada’s Canadian Housing Statistics Program.
The non-Canadian buyer ban also affected foreigners moving to the country for work because they did not yet have permanent residency status that would enable them to purchase residential property. This week’s change will allow foreigners to buy property if they have a minimum of 183 days left on a work permit at the time of purchase.