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Canada’s temporary ban on home purchases by foreign buyers will likely force some newcomers who would have otherwise bought a home to become renters.Fred Lum/The Globe and Mail

Canada’s temporary ban on home purchases by foreign buyers is likely to add demand to an already overheated rental market, some housing experts say.

As of the start of this year, federal rules aimed at making homes more affordable for Canadians prevent many temporary residents from buying residential property in urban areas. The new law, in effect for the next two years, will likely deflect some foreign demand for housing to the rental market, as the country continues to welcome record levels of newcomers, analysts say.

“At the margins, this is adding to the pressure in the rental market, there is no question about it,” said Benjamin Tal, deputy chief economist of CIBC World Markets.

Most temporary residents rent during their first few years settling in Canada, Mr. Tal said. But the rules will likely force some newcomers who would have otherwise bought a home to become renters, while others who already rent here may have to push back their homebuying plans, he added.

To be exempt from the ban, temporary residents must have been working full-time and have filed taxes in Canada for at least three of the four years preceding a home purchase. Non-Canadians who have recently arrived or started working in the country and who aren’t yet permanent residents do not meet the criteria. (The ban does not affect permanent residents.)

Among them are highly-skilled foreigners who’ve relocated to Canada as part of an intracompany transfer within a multinational firm and professionals with work permits granted under the North American free-trade agreement and other similar treaties, said Peter Rekai, a Toronto-based immigration lawyer.

Cash and other rental incentives dwindle in a highly competitive housing market

“These are people who made a commitment to be in the work force, to live here,” he said. And some are highly paid professionals who’d normally sell their homes in their country of origin and buy a house in Canada in cash, he added.

Now these individuals are stuck signing expensive home leases instead of taking advantage of declining real estate prices, Mr. Rekai said.

International students and recent graduates of Canadian postsecondary institutions who have work permits are also among those who may be forced to rent for longer than planned because of the ban, according to Mr. Rekai.

Still, it’s difficult to quantify just how much activity the foreign buyers’ ban will shift from the ownership to the rental market, said Shaun Hildebrand, president of housing market research firm Urbanation Inc.

Immigration, Refugees and Citizenship Canada, or IRCC, said in an e-mail that, as of the end of November, there were nearly 662,000 people in Canada under the International Mobility Program, which allows employers to hire temporary workers without the need to show that Canadians and permanent residents aren’t available to fill the job. Another 161,000 people had permits issued under the Temporary Foreign Worker Program, which is meant to address labour shortages.

According to the latest available data from Statistics Canada, which predates the pandemic housing boom, properties with at least one non-resident owner accounted for 9 per cent of the residential housing stock in Vancouver and 5 per cent in Toronto.

The limited data available on foreign homebuyer activity suggest the ban is likely to have “some, but not a huge, impact on the rental market,” Mr. Hildebrand said, speaking specifically about Toronto.

One question, though, is whether the current immigration backlogs will amplify the effect of the new rules on the rental market. Delays in processing permanent residency applications could force some foreign work permit holders to remain tenants for longer, Mr. Rekai said.

IRCC has been trying to reduce processing logjams caused by the pandemic and ramped-up immigration targets. The ministry said by e-mail that permanent residency applicants chosen through Express Entry, a federal program meant to prioritize desirable skilled immigrants, can expect processing time to be within the program’s six-months service standard.

But Mr. Rekai said that, while processing has sped up recently, the expected wait time to obtain permanent residency still ranges between six months and two years, depending on the type of application.

With Canada slated to take in another record number of immigrants this year, CIBC’s Mr. Tal expects the rental market to remain “on fire.”

The average rent for properties advertised through, a national rental listings site, was just over $2,000 in December, an increase of more than 12 per cent compared with the same month last year.

In Vancouver and Toronto, the country’s two most expensive markets, the average asking rent for a one bedroom was up around 17 per cent and 21 per cent, respectively, compared with a year earlier, according to a report by and Urbanation.

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