Professional athletes and senior executives trying to buy a home in Ottawa are among those being affected by the foreign buyer ban put in place by the federal government earlier this year, realtors say.
Larry Mohr, chief operating officer and licensed partner with real estate company Engel and Volkers, said the legislation has turned more than one foreign athlete or executive away from the Ottawa market.
“Up to 16 months ago, we never had to ask these questions about your citizenship or where you’re from,” he said. “Now we’re dealing with a number of client situations where most of them aren’t aware of the restrictions. They show up at an open house, say they’re interested, and we have to walk them through the measures.”
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Rolled out Jan. 1, 2023, the Prohibition on the Purchase of Residential Property by Non-Canadians Act does exactly what it says in its title: disallows anyone who isn’t a Canadian citizen or permanent resident from purchasing residential property in the country.
The goal is to address the ongoing housing crisis that’s keeping homeownership out of reach for many Canadians who can’t afford skyrocketing prices.
But now, months into its implementation, it isn’t necessarily the ban itself that’s been a barrier for high-earning clients.
In March, the federal government introduced amendments to the act that allowed some work permit holders to purchase homes and vacant land. That means foreign workers such as professional athletes, who spend months working in Canada, shouldn’t have a hard time making a purchase.
But in Ontario, Mohr said, it isn’t so simple. That’s due to the 25 per cent speculation tax that non-Ontarians have to pay on residential properties in the province.
“Even after they do pass the ban, they almost certainly have to pay that 25 per cent tax,” said Mohr. “We’re dealing with some client situations where, unfortunately, they haven’t been able to move ahead. They are getting a bit of a surprise when, even if they’re eligible to buy, they’re going to be subject to a very severe tax implication.”
Real estate agent Sarah Hunter, who also works with high-profile clients, has noticed a similar trend.
“I’ve seen a number of instances where professional athletes or executives moving to Ottawa and are here for three to four years are forced, essentially, into renting,” she said.
For many of these clients, the extra money needed to buy in Ottawa isn’t worth it, even if they’re forced to put their money into a rental, said Hunter, also with Engel and Volkers.
“From a financial standpoint, it doesn’t necessarily make sense,” she said. “When they’re faced with that 25 per cent tax, it just doesn’t make sense anymore. It’s unfortunate because a rental property doesn’t give them as much control for their family and lifestyle as they’re looking for.”
But it isn’t just high earners being affected. Hunter said she’s seen similar, and sometimes trickier, situations across the board.
“I’ve met everybody from first-time buyers who are waiting to get their citizenship, to executives with those high incomes,” she said. “You can definitely see the frustration, largely because it doesn’t allow them to feel settled in a home. They’re contributing members and they want to put down roots and feel at home. They’re not able to do that.”
The legislation, which has already been amended in just a few months, has also created confusion.
“We usually tell (foreign buyers) they have to talk to an immigration lawyer,” said Mohr. “We’re not experts. They need to check their work permit. The ban only applies to some properties, so depending on what they want to buy, it might be allowed depending on the area code. It’s become a very complicated process to determine whether a foreign national is actually eligible to purchase property or not.”
Part of the complication comes down to poor roll-out and communication, according to Michael Bourque, CEO of the Canadian Real Estate Association.
“We didn’t actually get to see the bill until maybe two weeks before it came into effect,” he said. “For our 160,000 members, we would normally provide a lot of information about legislation and how to comply. I think they didn’t give us enough time to understand what was in the bill and to ask questions and seek interpretations.”
Bourque does not mince words in his criticism of the ban, calling it a “terrible piece of legislation.” But the good news, he said, is that the bill is set to sunset in 2025.
When that happens, Bourque said he thinks the government should focus more on increasing supply, rather than trying to keep out buyers, to address affordability.
“We need people to come to Canada; we need immigrants and we need skill,” he said. “This legislation says you can come here, but you can’t buy a house. I just think it’s incredibly unfair.”