Buying a home in Canada as a non-Canadian
Buying a home in Canada as a non-Canadian
Temporary residents may still be able buy a house in Canada if they meet certain conditions under the new regulations.
The Prohibition of Purchase of Residential Property by Non-Canadians Act was passed by Parliament in June 2022 and came into effect on January 1 of this year.
Broadly speaking, the new rules will prohibit any foreign investor who is not a Canadian citizen or permanent resident from buying residential property. The rule will last for two years before being automatically lifted.
The Act specifically prohibits foreign commercial enterprises and persons who are not Canadian citizens or permanent residents from purchasing non-recreational residential property in Canada.
Residential properties include detached houses or similar buildings, semi-detached houses, townhouse units, residential apartment units and other similar establishments.
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The government introduced the bill in Budget 2022 as part of Canada's strategy to reduce housing costs, which has been escalating in recent years.
According to the Canadian Real Estate Association (CREA), the average home price will soar to $816,720 in February 2022. As of November 2022, that price has dropped to $632,802. Still, that's considered a high price that puts homeownership out of reach for many, as the average Canadian earns $58,800 in 2021.
The government points to foreign investors buying homes in Canada, but never actually living in them, as a driver of higher residential prices.
What are the exceptions?
The new bill is not a blanket ban on foreign investors buying real estate. They can still buy leisure properties such as villas and holiday homes. Properties containing more than three separate units are also exempt.
Additionally, the bill does not include homes outside of census metropolitan areas (cities with a population of more than 100,000).
There are also exceptions for non-Canadians who buy a home with a Canadian spouse or common-law partner who later find themselves in a transitional situation, such as a divorce, or any non-Canadian who inherits a home after death.
Can temporary residents buy a home in Canada?
The Act does not apply to Canadian citizens or permanent residents. Temporary residents with a valid study or work permit will also remain eligible to purchase a home in Canada. However, there are several conditions for temporary residents, as the government needs to prove the intention to become a permanent resident and settle.
For example, a person enrolling in an authorized study program at a designated learning institution in Canada must meet at least one of the following conditions:
- they filed all required income tax returns under the Income Tax Act for each of the five taxation years preceding the year in which the purchase was made,
- they were physically present in Canada for a minimum of 244 days in each of the five calendar years preceding the year in which the purchase was made,
- the purchase price of the residential property does not exceed $500,000, and
- they have not purchased more than one residential property
This means that anyone who wants to buy a home in Canada and holds a study permit must be able to prove they have lived in the country for 244 days in each of the past five years before buying. They also need to prove that they filed tax returns in Canada during the same period.
It's also important to note that the $500,000 maximum purchase price may not be enough to buy a home in Ontario or British Columbia, where the average home price is still over $800,000 and where the housing crisis is worst.
People with a valid work permit in Canada also have conditions they must meet, such as:
- they worked in Canada for a minimum period of three years within the four years preceding the year in which the purchase was made, if the work is full-time work as defined in subsection 73(1) of the Immigration and Refugee Protection Regulations, (IRPA).
- they filed all required income tax returns under the Income Tax Act for a minimum of three of the four taxation years preceding the year in which the purchase was made, and
- they have not purchased more than one residential property.
In this case, less time has been spent in Canada than those who are studying, but work permit holders must still demonstrate at least three years of full-time employment and tax returns from the previous four years.
The bill also places the onus on non-Canadians to demonstrate their qualifications to Canadian real estate agents. Temporary residents are responsible for all costs involved in obtaining proof of eligibility, such as retrieving documents for work permits and assessment notices. They may also require documents to prove physical presence in Canada, such as lease agreements, utility bills, or entry and exit records into Canada.
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