US Buyers Grab Homes Ahead of Canada's Ban on Foreign Buyers

In April—in the midst of a red-hot housing market and soaring home prices—Prime Minister Justin Trudeau’s government announced a two-year ban prohibiting foreign investors from buying homes in Canada.

The ban, which applies to non-Canadian citizens and non-permanent residents as well as foreigners, goes into effect on Jan. 1.

Six months later—a period that saw housing sales collapse by 36% as interest rate hikes took their toll—comes a new report which indicates that one of the bright spots in the gloomy Canadian housing market has been Americans rushing to grab vacation homes up north before the ban goes into effect.

A new report from Royal LePage shows that 75% of US citizens living in towns on the border with Canada and owning recreational properties in Canada made their purchase after the foreign buyer ban was announced.

Of those US citizens who purchased Canadian recreational properties following the announcement, 77% of the 1,500 US citizens surveyed said they were influenced to buy before the end of this year because of the impending ban, the report said.

Roughly 70% of those surveyed between Nov. 8 and Nov. 14 by Royal LePage said they or their spouse has Canadian citizenship and at least 43% owned a recreational property in Ontario. About 40% own a recreational property in Quebec; 35% in Atlantic Canada; 32% in British Columbia; 17% in Alberta and 16% in Saskatchewan and Manitoba.

Adding irony to unintended consequences, the government—which is still tweaking the foreign-buyer ban, reportedly is considering exempting vacation homes.

Another possibility with ironic overtones is that the government ultimately may decide to scrap the ban altogether in order to stimulate the housing market with an influx of foreign buyers.

CRE firms in Canada are keeping their fingers crossed that statistics released last month by the Canadian Real Estate Association (CREA) signal that the housing market slump has hit bottom, GlobeSt. reported.

Home sales rose nationally in Canada by 1.3% in October, the first monthly gain since February. More importantly, the uptick happened across provinces, with about 60% of Canada’s regional housing markets seeing an increase in sales and the first rise in new listings in four months.

The news was immediately embraced by the CRE community, with online realtor Zoocasa suggesting the data is sign that the Canadian real estate market has adjusted to the higher cost of borrowing, with buyers and sellers who are “sick of sitting on the sidelines” making their way back into the market, according to a report in the Vancouver Sun.

The CREA, in a statement accompanying the release of the October sales data was a bit more understated.

“In October, sales across the county increased for the first time since before interest rates started to rise last winter. Of course, we’ve known the demand was there, so it’s just been a matter of some playing the waiting game as borrowing costs and prices have adjusted,” said Jill Oudil, CREA chair, in a statement.