As foreign homebuyer ban takes effect, experts expect little change in B.C.

Canada’s new temporary ban on foreign homebuyers will likely do little to free up supply or bring down prices in B.C., experts say.

The new measure, which took effect on Jan. 1, 2023, bars most non-residents and foreign commercial enterprises from buying residential properties in Canada for the next two years.

The ban, which includes penalties of up to $10,000 for violators, was approved by Parliament last June, with the aim of cooling speculation and price growth that has left home ownership unaffordable to many Canadians.

Elan Weintraub, co-founder of Mortgageoutlet.ca, told Global News the ban appears “politically motivated” and of little utility in Vancouver and Toronto, the country’s two most unaffordable markets.

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Both British Columbia and Ontario already have 20 and 25 per cent foreign buyers’ taxes in place, he said, leaving them with already small pools of would-be non-resident buyers.

“Truthfully, I think this is a waste of time. I think that number one, if you look at the data, there are very few foreign buyers. It’s not like it’s 30 per cent or 50 per cent or 70 per cent of the country,” he said.

“Could there be some shifting into other provinces? Potentially, but we’re dancing around the head of the pin. It’s a very irrelevant policy, it’s a politically driven policy in my opinion.”

When British Columbia first implemented its foreign buyers tax in 2016, transactions involving foreign nationals accounted for 6.6 per cent of sales.

According to the Ministry of Finance, that number sat at about one per cent by June 2022.

Economist Tom Davidoff with UBC’s Sauder School of Business said the new ban may have an impact on some parts of Canada. But like Weintraub, he said the potential benefit is likely already baked in by the province’s existing foreign buyers’ tax.

What’s more, Davidoff said the effects of the tax were mostly felt at the high end of the market, in the most expensive neighbourhoods.

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“The first round of foreign buyer taxes, which did delete a fair amount of foreign demand, had modest impacts on affordability,” he said.

“I would expect the second round in its wake to do almost nothing in Vancouver.”

Both men argued that the government has a variety of policy options it could use if it wanted to have a more immediate impact on housing affordability.

Weintraub suggested Ottawa crack down on investors looking to buy residential real estate while finding ways to make it easier for homeowners to buy.

Mortgage amortization periods for first-time buyers could be extended, he said, while mortgage rates or regulations could be toughened for investors with multiple properties.

Davidoff said the federal government could use its power of the purse to pressure municipalities into ending zoning policies that prioritize single-family housing.

“That just makes absolutely no sense based on what fraction of the population can afford what product,” he said.

“Requiring that local governments adapt their housing policy to reality on the ground would be far more impactful than a ban on foreign buyers.”

While Davidoff said he didn’t expect a major impact from the new ban, he said housing prices should dip in the coming months as the delayed effect of rising interest rates filters through the market.

The new ban will cover residential properties, including detached houses and similar buildings of one to three units, semi-detached houses and condos.

Recreational properties such as cabins and lake houses are exempt, as are properties not located in a census agglomeration or a census metropolitan area.

Non-residents with temporary work permits, some international students and refugee claimants are also exempt.