With more flexible remote work options and pandemic travel restrictions fading away, more and more Americans are looking to buy property abroad. While many first-time buyers may not want to venture off too far from home, one of the most convenient options seems to be Canada, but the last few weeks have brought big changes to what’s possible for foreign investors in the Great White North.
Can Americans buy property in Canada?
In the past, yes! U.S. residents could pretty easily purchase and own property in Canada without needing to become a Canadian resident. Many Canadian banks also offered mortgages and home equity loans with similar financing terms to what is practiced in the U.S.
The owner would just need to report income or proceeds from selling their property to taxing authorities in both countries (the IRS and the Canada Revenue Agency or the CRA).
Recent changes in Canadian property laws
In early April 2022, Canadian Prime Minister Justin Trudeau announced new key measures titled Budget 2022: A Plan to Grow Our Economy and Make Life More Affordable. You can read the full plan above, but the key points relevant for foreign investors is that the Canadian government has placed a two-year ban on foreign buyers as well as higher taxes for people who sell their homes within a year, particularly between Vancouver and Toronto.
Bloomberg notes that “Home prices in Canada have soared more than 50% over the past two years. The market saw a record monthly increase in February as buyers acted ahead of rate increases by the Bank of Canada, taking the benchmark price of a home to C$869,300 ($693,000).”
The Canadian government cites its goal as curbing unfair practices that drive up the price of housing. Canada has seen the housing market heat up, with prices spiking over 20% last year with rental rates not far behind. The cost of owning a home in relation to median incomes is now at a 31-year-high, according to calculations from the Royal Bank of Canada.
The recent announcement also mentions goals such as:
Taking steps to ensure property flippers pay their fair share of taxes
Taxing all assignment sales of newly constructed and substantially renovated homes
Working with provinces and territories to develop and implement a Home Buyers’ Bill of Rights and bring forward a national plan to end blind bidding.
In addition to the bans, the Canadian government will be implementing various initiatives to help out first-time Canadian homebuyers.
Are there any workarounds?
As these new measures have only recently been announced, there is still a lot of buzz about what the rules mean and what foreign buyers interested in Canadian property should do. With that being said, the government has been clear about a few exceptions to foreign buyers, including permanent residents and foreign students, who would not be considered foreign buyers.
If you had your sight set on Canadian property, you’re probably better off directing your time, energy, and finances elsewhere; at least for the time being.
With this new ban in place, where will you look for property? Browse through Land Hub’s current listings for some inspiration!