The Prohibition on the Purchase of Residential Property by Non-Canadians Act is a pivotal law in the Canadian real estate sector. This Act, enacted on January 1, 2023, imposes a two-year ban on non-Canadians purchasing residential property in Canada.
The Act’s primary objective is to enhance housing affordability for Canadians, particularly in densely populated regions. By curbing foreign competition and augmenting the housing supply, the Act strives to enable more Canadians to become homeowners.
Violating this Act incurs substantial penalties. A non-Canadian, or anyone who knowingly aids a non-Canadian, found guilty of breaching the prohibition, will be liable to a fine of up to $10,000. Furthermore, a court can mandate the sale of the residential property.
Since its inception, the Act has seen several amendments. These amendments, effective from March 27, 2023, broaden exceptions to permit non-Canadians to purchase a home under specific circumstances. For example, it was clarified that foreign buyers could acquire properties for development purposes. Another notable amendment was that non-Canadians could also purchase Vacant Land designated for residential use.
The Act has significant ramifications on the Canadian real estate market. The prohibition on foreign homebuyers applies to individuals who are not Canadian citizens, not registered as an Indian under the Indian Act, not permanent residents, or corporations whose shares are not listed on any Canadian stock exchange. This has reduced the pool of foreign buyers with whom Canadian homebuyers traditionally compete, thereby slowing down new rental housing and commercial development across Ontario.
Nonetheless, the Act was projected to impact only about two percent of home purchases annually, based on discussions within the national housing agency prior to its implementation. Out of the 670,000 transactions that year, the CMHC estimates that just over 13,000 purchases were affected.
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