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Foreigners Banned From Buying Homes In Canada For Two Years As Prices Increase

In an effort to moderate a soaring real-estate market, Canada will prohibit most foreigners from purchasing homes for two years and will invest billions of dollars to promote new activity.

According to a person familiar with the subject who asked not to be identified because the topic is confidential, the measures will be included in Finance Minister Chrystia Freeland’s budget on Thursday.

The decision indicates that Prime Minister Justin Trudeau is getting more proactive in managing one of the industrialised world’s most expensive property markets – and that the government is becoming increasingly concerned about the electoral fallout from rising inflation and house costs. Over the last two years, home prices in Canada have increased by more than 50%.

In February, the market saw a record monthly increase as purchasers responded ahead of the Bank of Canada’s rate increases, raising the benchmark price of a property to C$869,300 ($693,000). Since February 2020, housing prices in Canada have increased by more than 50%. According to the source, the foreign-buyer prohibition will not apply to students, foreign workers, or foreign citizens who are permanent residents of Canada.

“I don’t think prices are going to fall as a result, though I do think it takes away at least some of the competition in what is the most competitive market in Canadian housing history,” Simeon Papailias, founder of real estate investment firm REC Canada. “I don’t think a two-year band-aid is going to have an impact on what’s a fundamental lack of supply.”

Several billion dollars will be spent in Freeland’s budget on the construction of affordable housing and to assist local governments in updating their procedures to allow for faster construction of new buildings. However, the government is planning further measures that might potentially stimulate demand, ostensibly to assist first-time home purchasers.

According to the sources, Freeland will introduce legislation that will let Canadians under the age of 40 save up to C$40,000 ($31,900) for a home down payment within a new tax-exempt vehicle. Last year during the election campaign, Trudeau’s party also suggested a ban on “blind bidding” for properties, which is the current practice of keeping offers hidden when someone is auctioning a home.

Blind bidding has been accused of hastening price increases in a hot market, with properties selling for hundreds of thousands of dollars more than the asking price. Some feel that secret bidding forces each potential buyer to make the highest bid possible. The industry group for the country’s real estate agents has now withdrawn its support for the practice.

On Wednesday, the Canadian Real Estate Association unveiled a pilot initiative to display real-time offers on properties listed on its own listing website,

“Multiple-offer scenarios have become increasingly commonplace in today’s real estate environment,” Michael Bourque, the association’s chief executive officer, said in a statement. “Canadian property buyers and sellers seek greater confidence in the process.” The pilot will begin in select markets this summer, the press release said.

Legal Disclaimer: This article is provided for information purposes only.

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