The Government of Canada announced a series of amendments to the foreign buyer ban o expand the exceptions to the regulations, some of which have become an unintended thorn in the sides of developers across the country.
See full statement below:
The Canadian government has made significant amendments to the Prohibition on the Purchase of Residential Property by Non-Canadians Act, which came into effect on January 1, 2022. Here's a breakdown of the changes:
- The foreign control threshold has been raised from 3% to 10%. This amendment aims to provide relief to developers, particularly real estate investment trusts (REITs), which were heavily impacted by the previous regulation.
- Non-Canadians can now purchase residential property for the purpose of development. This exception was previously only applicable to publicly-traded corporations.
- Vacant land zoned for residential use or mixed-use with residential can now be purchased by non-Canadians for any purpose. This amendment repeals Section 3(2) of the act.
- Work permit holders and those authorized to work in Canada can purchase residential property if they have 183 days or more remaining on their permit and have not purchased more than one residential property.
The government originally framed the act as a means of making housing more affordable for Canadians by targeting foreign investment. However, many in the industry have expressed doubts about its impact, with some regarding it as a performative political gesture. Nevertheless, these amendments may provide some relief to developers.
The change in foreign control threshold from 3% to 10% is a significant amendment that will benefit developers, particularly REITs. The previous 3% threshold was deemed overly-restrictive by many, and this amendment aims to provide more flexibility. In addition, the exception that allows non-Canadians to purchase residential property for the purpose of development is a welcome change. The previous regulation only applied to publicly-traded corporations, but this amendment now allows non-Canadians to purchase residential property for development purposes.
Moreover, the ban on purchasing vacant land zoned for residential use or mixed-use with residential has been repealed. This change means that non-Canadians can now purchase such land for any purpose. Lastly, work permit holders and those authorized to work in Canada can now purchase residential property, as long as they meet certain criteria. These changes are intended to make it easier for newcomers and businesses to contribute to Canada by owning homes and building more housing.
Despite the government's intention to make housing more affordable for Canadians, some in the industry remain skeptical about the effectiveness of the act. However, these amendments may provide some relief to developers who were heavily impacted by the original regulation. It remains to be seen whether the act will come into effect for individual Canadians, but with these new amendments, it is likely that developers will feel some relief.
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