Advocates for the ban say it improves Canadians' chances of buying a property. Others feel it's keeping a lid on demand
Canada’s ban on foreign homebuyers, introduced in 2023 and extended for two more years in February, has long been a topic of intense debate in the mortgage industry. Upon its introduction, the government said the move would help keep homes available for Canadians, but some in the sector are now questioning whether the policy has worked or if it should be scrapped amid a continuing housing slowdown.
In a July 29 open letter to the Carney government, a series of Canadian business and real estate leaders urged the feds to consider removing the ban, arguing that it's weighing against home construction, putting jobs at risk, and making the affordability crisis even worse.
That letter also called on the provincial government in British Columbia to reconsider a tax on foreign buyers, generating a firm response from premier David Eby who said the province was "not going back" to the days of rampant price growth and hypercompetitive markets spurred by foreign investment.
Limited effect on prices and inventory
The extension of the federal ban until 2027 was announced in February, with federal officials arguing that restricting foreign ownership would help address affordability concerns and free up supply for Canadian buyers. However, real estate giant Royal LePage said in 2024 that the introduction of the ban had had "virtually no impact" on housing prices.
Royal LePage, a Canadian real estate franchiser and owner-operator, pointed out last year that luxury home prices had mostly held steady, unlike the broader housing market. Halifax saw the biggest jump, with luxury home prices up 8.6% in the first eight months of 2024. Toronto prices rose 3.9%, while Vancouver and Montreal saw small drops of 1.8% and 2.8%.
"The prohibition on foreign buyers has had virtually no impact on housing prices in Canada, as we expected. Prolonging the international buyer ban will not make housing more accessible to Canadians," said Phil Soper, president and CEO of Royal LePage.
In 2024, foreign ownership made up just about 1% of the Canadian market, down from 2-3% two years ago, according to economists and realtors. They point out that foreign buyers usually focus on high-end homes in big cities like Toronto, Vancouver, and Montreal, which does little to help first-time buyers find affordable options. Statistics Canada data from before the pandemic showed similar low levels.
Immigration slowdown and market challenges
Foreign buyers are still allowed to purchase property in Canada if they live here but the country has seen a recent drop in immigration, which has long supported housing demand. After winning the April election, Prime Minister Mark Carney announced he would limit temporary workers and international students to under 5% of Canada’s population by 2027, from the recent peak of 7.3%. Carney said this move aims to reduce pressure on housing and public services.
Proponents of lower immigration and a foreign buyer ban argue they remove plenty of upward pressure on home prices and give residents a better chance of purchasing a property with less competition.
Former Prime Minister Justin Trudeau announced last year plans to cut overall immigration by about 20%. Trudeau’s government had been responsible for bringing in the foreign buyer ban to help control soaring home prices, especially in cities like Vancouver and Toronto.
Bank of Montreal (BMO) senior economist Sal Guatieri said during a conference this year that lower immigration “will be a bit of a dampener on consumer spending and, of course, the housing markets and rental markets for a little while.”
This could slow Canada’s economic growth and may force the Bank of Canada to cut interest rates more than expected. Guatieri added that with the government focused on reducing immigration, Carney might also scale back plans to double the country’s yearly home construction targets.
Public support remains strong
Despite mixed results, public sentiment appears firmly behind the ban. A Research Co. survey found that 76% of Canadians support the federal ban on foreign real estate purchases, which runs until January 1, 2027. Support is strong across all major parties, with 82% of Conservative voters, and 78% of both Liberal and New Democrat voters in favor.
Finance ministry spokesperson Katherine Cuplinskas also defended the extension, stating, "Canadian homes should be places for Canadians to live in and not a speculative asset class for foreign investors."
Meanwhile, Brendan Ogmundson, chief economist at the British Columbia Real Estate Association, suggested letting foreign buyers purchase only newly built homes. He said this could bring in needed investment without affecting resale prices. Ogmundson also noted that allowing foreign ownership for pre-sales and new builds could help developers get stalled projects moving again by easing financing and boosting sales.
