Please note that we have updated this blog post regarding Foreign Buyers in Canmore and Banff several times. The Government of Canada has confirmed that they will implement the Foreign Buyer Ban for two years (will it go beyond? Possibly) and the underused housing tax. The details continue to evolve as the CRA receives feedback. There are some gaps that we are pursuing clarity on. Stay tuned in the months to come.
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Under Used Tax & Prohibition, Non-Canadian Home Buyers
The Federal Government recently announced new measures (as a proposal) to slow down foreign investment in Canada. The two-year ban (which takes effect January 1, 2023, through to January 1, 2025) on foreign investment will primarily impact major Canadian cities.
The intent is to ease the increase in real estate values within cities and larger suburbs in Canada. These cities have seen unsustainable real estate values over the last few years.
But frankly, Vancouver and Toronto have been at an unsustainable upward rate for over a decade!
Why Do Foreign Buyers Like Investing In Canada?
Foreign buyers discovered great opportunities in Canada about 15 years ago. Since then, our largest cities have seen incredible gains in real estate value. It makes it unaffordable to younger buyers and hard for growing families to move up the property ladder to a larger home. This has driven many families to move out of cities like Toronto to move into the Greater Toronto Area. Vancouver residents have moved into the lower mainland and Squamish in search of affordable housing.
The Chinese market is an appropriate example of the influx of investment money into real estate. Many foreign investors are motivated to get their money out of Chinese banks and into a safe, stable investment where the funds cannot be touched. Funnily enough, the original intent was not to even “make” money on their investment. These investors wanted to ensure their money was untouchable by their Government. Foreign real estate investing here in Canada led to considerable increases in value – along with other nationals like Iranians, Americans and Russians. Little did they know that their capital would only be protected in Canadian real estate but that the value had skyrocketed. No surprise, this brought more foreign real estate investors to our lax federal rules.
Keep in mind that the Chinese Government has been implementing their rule of Government over the incredibly wealthy residents of Hong Kong. Hundreds of thousands of people wish to move to Canada to escape the autocratic rulers. The influx of buyers is coming to our cities.
Canada has long held a safe governing rule, stable markets and a quality of life that few countries can boast about. It’s no wonder that Canada has followed suit with what New Zealand implemented not too long ago.
Foreign Students
University tuition has become a booming business across Canada. Our universities are world-class and relatively affordable compared to our neighbours to the south. There tuition fees for international students are multiples higher than what Canadian students pay. A common theme (and will continue to be permitted) is that international students’ parents purchase a home for their child to attend a Canadian university. Four years later, the increase in value of the house has typically skyrockets allowing for all student’s debts to be paid off should they sell. It’s an interesting model that has worked for many international students. Note that the Federal Government has no plans to stop this. They see the need to grow the population of Canada and have more educated residents – not to mention increased revenue streams. We have learned that there will be a purchase price cap, which would hinder a foreign student’s family from purchasing them a multi-million dollar home. We are awaiting the details
A Current Loophole Is Ending
A primary loophole that has been used for decades is ending. This foreign buyer loophole had allowed foreign investors to buy a home through a private corporation – the government is now cracking down on the corporation ownership percentage held by non-residents. The details are still being ironed out.
➤ For more information on Canmore real estate, check out:
Foreign Ownership Under Used Tax
Foreign buyers (and existing foreign ownership) of property in Canmore will be responsible for paying an additional annual tax of 1% of the property’s assessed value. This was to be backdated to January 2022 – however, we have learned that it’s unlikely that the tax will be accused by owners in 2022 – a tax return will be necessary stating that the property is underused either way. For example, if the property’s assessed value is $2 million, then the homeowner will owe an additional $20,000 for that year.
How Will The Foreign Investor Rules Impact Canmore?
There will be a slowdown in the Canmore real estate market due to the prohibitions of foreign buyers beginning January 1, 2023, – no homes are permitted to close on this date or later. Note that many foreign buyers are rushing in 2022 to purchase a home before January 1. Some refugees and diplomats are exempt from the ban. To be clear, a vast majority of foreign buyers will not be permitted to buy in the Bow Valley (or anyone where else in Canada beginning January 1, 2023, for two years.)
Interestingly, the Canadian government focuses on major cities and their surrounding areas. There will not be an allowance to Canmore due to population (sub 30,000); it may be possible for certain exceptions related to diplomats and refugees. Again, we are still learning to figure out what the government has stated – we are providing them with feedback as there are remaining gaps that require clarity. There are also allowances to be used for at least 28 days a year (not continual days) – which means that the non-residents would not have to pay the Under Used Tax should they stay in the house for 28 days a year – they would have to create an annual statement for the CRA. required to pay the property tax.) The owner and owner’s spouse, not another immediate family, are permitted to stay – as it stands, there are no children of the owners to work around the rules. Long-term rents of at least 180 days a year would also be exempt.
If you are a foreign buyer and purchased a pre-construction home in Canmore and it is closing (you are taking possession of title) on January 1, 2023 or after, you must resolve this immediately. Speak to us if you do not have a real estate agent. It is worth inquiring whether you can change the closing date, sell the paperwork, negotiate a rent to buy, or request permission to cancel the deal with the builder; then, you will face the full extent of the law. At this stage, the government plans to repossess the house and land. Everyone involved in the transaction will be charged at least $10,000 as they were apart/advising on the real estate transaction.
*Note: there are several ins and outs to this proposal and rules; getting an accountant and lawyer to review your situation if you are a foreign buyer is essential.
Will will certainly be keeping our eyes open to the shifts in the real estate marketplace here in Canmore. We can attest to an uptick in website traffic from other counties last month.
I found this very informative and wondered about the National Park Real Estate for foreign investors?
Hello Bill – Happy to hear that you found this post helpful. Great question. Parks is a very different market. There are restrictions around purchasing and ownership within the National Park boundaries. There will not be an impact within Parks because you need to reside and work within the Park – Banff National Park and its rules are a perfect example. Foreign buyers, therefore, would not be permitted to purchase unless they were to abide by the ownership rules set forth by Parks Canada.