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Do You Want to Buy a House in Canada? Not So Fast.

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Beginning Jan. 1, America’s neighbor to the north will ban most foreigners from buying residential property for two years. Why?

This summer, after the Supreme Court struck down the landmark 1973 decision in Roe v. Wade, Americans flooded Google and typed in “how to move to Canada” — the search term spiked 850 percent in one hour. “How to become a Canadian citizen” spiked 550 percent.

Moving to Canada has long been a kneejerk impulse when domestic politics turn sour, and not just in the United States. In Britain, the “How to move to Canada” search shot up in June 2016, shortly after the Brexit referendum.

But Canada may not want you anymore — at least, it’s making it much harder to buy property there. Beginning Jan. 1, America’s friendly neighbor to the north is enacting a wide-ranging ban on the purchase of residential property by non-Canadians for two years.

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Like many countries during the pandemic, Canada saw huge price increases for both sales and rentals as borrowing rates plunged to record lows, taking inventory with them. In the midst of a bruising election campaign in 2021, Prime Minister Justin Trudeau’s Liberal Party of Canada took a swing at a housing crisis that was becoming a political crisis. “The desirability of Canadian homes is attracting profiteers, wealthy corporations, and foreign investors,” proclaimed a campaign website. “Homes are for people, not investors.”

After a close election victory, the party last spring quietly introduced the Prohibition on the Purchase of Residential Property by Non-Canadians Act, putting foreign home buyers in the cross hairs.

“As multicultural as Vancouver and Canada are, there is a sentiment around, ‘Yeah, Asians, foreigners, immigrants are coming here, buying up real estate, eating supply and driving up prices,” said Jacky Chan, the Vancouver-based founder and CEO of BakerWest Real Estate.BakerWest

The proposal was a response to a widespread political sentiment, but it “sounded absurd,” said Jacky Chan, the Vancouver-based founder and CEO of BakerWest Real Estate, which markets luxury high-rise condominiums nationwide.

“As multicultural as Vancouver and Canada are, there is a sentiment around, ‘Yeah, Asians, foreigners, immigrants are coming here, buying up real estate, eating supply and driving up prices,’” said Mr. Chan, who was born in Hong Kong and has lived in Vancouver for 29 years. “Most foreigners buying real estate are not speculators. They’re immigrants buying homes to live in.”

Besides, regional governments were already working to address skyrocketing house prices. In Ontario, the provincial government raised the real estate speculation tax for foreign buyers from 20 percent to 25 percent. British Columbia enacted a 20 percent tax on international home buyers. And the measures seemed to be working — foreign investment in real estate fell from a high of 9 percent of residential sales in June 2016 to about 1 percent in June 2022, according to data from the British Columbia Ministry of Finance. “No developer in his right mind was even targeting them,” Mr. Chan said. “Why would a ban make sense?”

By mid-2022, prices across Canada had already begun to recede. But in June, without fanfare, the prohibition on foreign buyers was signed into law. In fact, it had gone largely undetected, even by many real estate professionals.

“This was one line in a document,” said Julie Côté, senior manager of the real estate taxation practice for nonresidents at the FL Fuller Landau accounting firm in Montreal. “Then, silence. They never let the world know this was actually happening.”

Mr. Trudeau and other politicians have said little about the law since it passed, and it has received scant coverage from local media outlets. “Trying to get information from the government about this has been a hell of a task,” Ms. Côté said.

“They never let the world know this was actually happening,” said Julie Côté, a Montreal-based property tax expert, about the Canadian government’s forthcoming prohibition on foreign home buyers.Alexi Hobbs for The New York Times

That may be because the law has stirred accusations of xenophobia. As immigration numbers hit all-time highs in Canada — census data released in October revealed that immigrants now make up 23 percent of the population, with the vast majority coming from India and China — some industry veterans say there is a connection.

Non-Canadians “got a lot of blame for the housing crisis, and it was a big issue politically,” said Brendon Ogmundson, chief economist of the British Columbia Real Estate Association. “But the pandemic shut off nearly the entire segment of foreign buyers, and prices still hit an all-time high. That’s evidence that foreign buyers are not significant drivers of the market, and this ban will not affect anything.”

Michael Bourque, the Ottawa-based chief executive of the Canadian Real Estate Association, called the law “an affront to Canada’s brand as a welcoming, multicultural nation.”

“We’re telling people we don’t want them here,” he said.

In key foreign-buyer markets like Hong Kong, where immigration to Canada is booming, the law will have little impact on demand, said Alisha Ma, managing partner of the Hong Kong firm Halcyon Counsel Limited, which helps clients immigrate to Canada. “Clients are willing to wait for permanent resident status, and since we’re in a high-interest-rate environment, there’s even more of an incentive to wait,” Ms. Ma said.

Non-Canadians “got a lot of blame for the housing crisis,” said Brendon Ogmundson, chief economist of the British Columbia Real Estate Association. “But the pandemic shut off nearly the entire segment of foreign buyers, and prices still hit an all-time high.”Jackie Dives for The New York Times

But she argued that the new policy is aimed squarely at “domestic vultures in Canada,” and dismissed the notion that it is discriminatory. “It doesn’t contradict Canada’s welcoming immigration policies,” she said. “They’re just slamming the door on property investors.”

Federal officials declined to answer questions for this article. Housing Minister Ahmed Hussen did not return requests for comment. In an emailed statement, Adrienne Vaupshas, a spokeswoman for Deputy Prime Minister and Minister of Finance Chrystia Freeland, said the legislation targets a narrow segment of speculators. “This measure prohibits foreign commercial enterprises and people who are not Canadian citizens or permanent residents from acquiring nonrecreational, residential property in Canada,” Ms. Vaupshas wrote.

On Dec. 21, six months after the law was passed, the government issued a brief set of regulations, including exemptions and enforcement. They explained that the prohibition applies only in “census metropolitan areas” and “census agglomerations” — basically, cities that meet certain population criteria — and not to vacation homes in “recreational areas.” Exemptions include buyers with Canadian spouses or partners, refugees, and foreigners buying multifamily dwellings with more than three units (which could theoretically be rented to Canadians).

As for scofflaws, penalties of up to $10,000 Canadian may be imposed “on any party found guilty of knowingly assisting a non-Canadian in contravening the prohibition.” And offending buyers may be forced to sell the property, “receiving no more than the purchase price paid.”

For some, the regulations fell short of resolving the nuances of the law. “There are no significant clarifications,” said Stephen Cryne, the president and chief executive of the Canadian Employee Relocation Council, which advises companies on work force mobility.

Brokers say the ambiguity has left them paralyzed. Rather than rush to beat the looming deadline, most foreign buyers will simply wait for the law to expire in two years. “My clients are in a holding pattern,” said Liza Kaufman, founding partner of Sotheby’s International Realty Quebec in Montreal. “When they hear even professionals can’t get clarity on the law, they’re opting to sit this one out.”

Only one of her clients, an American retiree who declined to be interviewed, is “rushing” to buy a Montreal pied-à-terre before the ban takes effect, she said.

Prime Minister Justin Trudeau campaigning Burnaby, British Columbia, in 2021. “Homes are for people, not investors,” proclaimed a 2021 Liberal Party campaign document.Carlos Osorio/Reuters

Though it exempts newcomers with residency status, the ban comes amid aggressive new immigration targets in Canada, announced last month and aimed at filling nearly a million job vacancies across the country. The government has proposed welcoming 465,000 new permanent residents in 2023 and more than 500,000 in 2025, even as applications for permanent residency fell sharply this year, according to government figures. During a news conference to announce the goals, Sean Fraser, Canada’s Minister of Immigration, Refugees and Citizenship, said: “Look folks, it’s simple to me: Canada needs more people.”

But Mr. Cryne said the law could have the opposite result. “This will have a chilling effect for people who want to move here, work here, and settle with their families,” he said.

Jenny Kwan, a member of Parliament who represents Vancouver East and the housing critic for Canada’s opposition New Democratic Party, said the law is missing the real culprits in the housing crisis. “The government must target real estate investment trusts,” or companies that invest in real estate for profit, she said. “We need to curb the financialization of housing.”

Some of these ideas are already in effect, combining with rising rates and inflation to slow price growth. The Trudeau government this year unveiled an anti-flipping tax to discourage property speculators, along with an “underused property” tax on international owners whose residences sit unoccupied for more than 180 days in a year.

Chinatown in Vancouver, where immigrants make up a significant portion of the population. In 2016, Asia accounted for seven of the top 10 countries of birth for recent immigrants, according to Statistics Canada.Jackie Dives for The New York Times

Earlier this year, the Canada Mortgage and Housing Corporation reported that 3.5 million more homes would need to be built by 2030 to achieve affordability for all Canadians, but campaigns around housing affordability “have focused on demand suppression, like our foreign-buyer taxes, and they’re politically favorable,” said Kevin Crigger, president of the Toronto Regional Real Estate Board, an industry association. “But for the last decade, we’ve called on government to look at supply.”

For now, Canada’s largest cities are seeing fewer international buyers casing the market. In Greater Toronto, “foreign participation in the market is, at most, 3 to 6 percent,” said Mr. Crigger. “Even if it’s that high, it’s nonexistent in the grand scheme of things.”

But a new wave of international buyers seems to be biding their time, willing to wait as the ban runs its course. Pauline Aunger, a real estate broker at Royal LePage Advantage in Smith’s Falls, Ontario, said she saw a flurry of buying activity after the initial announcement in April. Since then, she said, clients have been standing by for guidance, but not buying: “It’s very much a wait-and-see situation.”

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'We saved probably close to $100K': Affluent Americans are snatching up prime real estate in other parts of the world — as the US housing market slumps. Here's how to do it too – Yahoo Finance

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Laetitia Laurent knows the value of looking far and wide for a good deal. The Florida-based business owner and her husband had been hunting for a second home for five years before snagging an incredible bargain — in Paris.

She made an offer in January on a 415-square-foot, one-bedroom apartment in the coveted Golden Triangle area between the Champs-Élysées and the Seine, and closed in June.

While the U.S. housing market has been slowing down — thanks to elevated home prices and mortgage rates — there’s been a growing trend of wealthy American buyers investing in overseas homes, buoyed by favorable exchange rates and a strong dollar.

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“I think we saved probably close to $100,000 between the time we made the offer and the time we closed,” says Laurent, who will use the property as a vacation home and a space to host clients for her interior design firm, Laure Nell Interiors. The euro-dollar exchange rate plunged over 12% last year, falling below parity in August.

Whether you’re a retiree looking to spend your golden years somewhere warm and tropical, or someone investing in a second home for some extra rental income, international properties are currently all the rage.

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American buyers are buying properties abroad

The numbers show a clear trend. Coldwell Banker surveyed wealthy American buyers and noted that 67% of respondents own properties outside the U.S. According to Wealth-X figures, the number of high net worth Americans who purchased property abroad in 2022 was also expected to rise by 14% from 2021 and 29% from 2019.

Kelly Cutchin, country manager USA at global payments services provider Moneycorp Americas, says some of these buyers may be looking for an investment property or vacation home, while others could be “jumping the pond” and looking to relocate entirely.

Central America is currently the top preference for affluent Americans, followed by Canada, Mexico, Asia, South America and Europe.

Some countries, such as Portugal, also offer “golden visa” programs, in which wealthy individuals obtain residency or citizenship in exchange for a substantial investment, like in real estate.

The Trend report indicates that while the 55+ age group has the largest share of foreign property ownership, the 25-34 age group has moved up from last to second position.

Cutchin says this is due to generational wealth. “There are a lot more high net worth individuals (HNWI) under the age of 30 than before. These youngsters are looking to diversify their portfolios and starting young is almost never a bad idea.”

An October Bank of America study indicated that rich young Americans are looking to alternative investments, such as real estate and cryptocurrency to boost their wealth.

Why overseas locations may offer more perks

Laurent says that aside from her apartment’s Haussmanian architecture, the declining exchange rate and low mortgage rates in France at the time made it an excellent investment. Even now, French mortgage rates are just above 2%, while American rates remain over 6%.

American home prices, inflation and the political climate may be contributing to buyers looking abroad. If you’re thinking of relocating to a different country, you could sell your home for a high price now and potentially score a lower price elsewhere.

Read more: Rich young Americans have lost confidence in the stock market — and are betting on these assets instead. Get in now for strong long-term tailwinds

The rise of remote work and social media posts with enticing photos and reels of different countries could also encourage buyers to look outside of the U.S.

Cutchin says some buyers may be motivated by others in their social circle buying homes overseas. “We all have a bit of FOMO, right? ‘Everyone in my country club is doing it — so I want to have that same status as Suzy, and so therefore, I too need to buy a property in Paris, and we can vacation together with our families.’”

What US buyers need to know

Cutchin says the most important thing is to do your research. Speak to a real estate agent and an international tax consultant, and look into foreign ownership laws.

In some countries, you may need to afford an all-cash purchase. You could look into financing through your local bank or foreign mortgage products — but Cutchin says these can be limited and could require a larger down payment than what you might see in the U.S. “It’s not uncommon to see a deposit amount of upwards of 30%.”

You may also need to account for extra costs, like translator, tax and legal fees, international bank transfer fees and insurance.

Laurent, who has dual American and French citizenship, went through a French bank to secure her mortgage and needed to purchase life insurance to protect her loan.

Although Laurent benefited from the exchange rate declining last year, Morgan Stanley foreign exchange strategists are predicting it to rise back to $1.15 by the end of 2023. You could consider speaking to a currency expert to lock in your rate before making an investment overseas — for example, Moneycorp allows clients to lock in an exchange rate for up to two years.

“Let’s face it, if the rate moves against you 10 cents between now and June of next year — when you go to actually facilitate that transaction — it might actually place you in a situation where you can no longer afford to make that investment, or you’re not as comfortable as you were previously,” Cutchin says.

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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.

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Irish Commercial Real Estate Deals Plummet as Buyers Bide Time – Bloomberg

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Irish Commercial Real Estate Deals Plummet as Buyers Bide Time  Bloomberg

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Increasingly large down payments could help GTA homeowners weather downturn: Report – CP24

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A new analysis by realtor firm Re/Max says the Toronto real estate market may be better positioned than previously thought to weather the financial downturn expected this year, though there still may be some choppy waters ahead.

The new report compared average price and new mortgage values in different markets across the country between the third quarter of 2012 and the third quarter of 2022.

It found that in Toronto, loan-to-value ratios hovered at around 53 per cent in the third quarter of 2022, compared to 63 per cent 10 years earlier, suggesting people are putting down a higher percentage of the costs of a new home than they were a decade ago.

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Loan to value ratios are used to express how much debt a person holds on an asset compared to its value. The higher the percentage, the greater the debt level on the asset. 

Back in the third quarter of 2012, the average Toronto home price was $483,900, while the average new mortgage amount was $305,776, yielding a loan-to-value ratio of about 63 per cent. 

In the third quarter of last year, the average Toronto home price was 1,079,957 while the average amount for a new mortgage was $567,441, yielding a loan-to-value ratio of about 53 per cent.

So what explains the fact that homebuyers in Toronto are putting down more money even as prices have skyrocketed over the last number of years?

LTV ratios

Rising prices, Re/Max Canada President Christopher Alexander told CP24, are in fact part of the answer.

“Some people have generated a lot of equity over the years,” he said, alluding to people who have made hundreds of thousands of dollars from properties as the housing market took off.

A few other factors have also contributed to people having more money to put toward a home, the report says, including large profits realized in the stock market over a lengthy bull run.

“You’ve had the remote work phenomenon, people are allowed to keep their jobs and move to more affordable markets,” Alexander said.

“And the big, big story is the transition of generational wealth that’s been going on. The ‘bank of mom and dad,’ as we like to call it in the industry, has played a huge role in supporting — whether they’re first time homebuyers or move-up buyers — into purchasing homes at much higher down payment rates with chunks so that they can manage payments a lot easier.”

But while people in the Toronto area may be putting down a higher percentage of a home’s value than they were 10 years ago, there is no getting around the fact that the loans are nevertheless much larger than they were a decade ago — nearly double the size on average.

The report notes that given the steady climb in interest rates last year, “banks are tightening their own lending practices and proceeding with caution when qualifying today’s borrowers.”

The report says some bank appraisals are coming in lower than values paid in recent months, “sending buyers scrambling to make up the difference.”

“With overnight rates poised to climb on at least two more occasions the first half of 2023, market stability will undoubtedly be tested, but the latter half of the year is forecast to improve as homebuyers and sellers continue to acclimatize to new market realities.”

Limited supply of housing and a steady flow of new immigrants to the GTA are expected to buoy the housing market in the next year, the report says.

Alexander said that supply remains “shockingly low” and that some potential sellers may be holding back now because they perceive that they won’t get top dollar for their properties.

“I think the majority of sellers are hoping to get the most for their money just like buyers want to pay the least,” he said. “So you have a lot of them that don’t need to move, just wait. And right now what you’re really seeing is situational transactions. People that have kids, or have gotten married, divorced — the ones that really need to make a move are the ones you’re seeing bringing product to the market right now.”

He said potential job losses triggered by an economic downturn could also send more homes to market if people can no longer afford their payments.

The report noted that mortgage delinquency rates remain low in Canada.

“While challenges certainly exist in today’s high interest rate environment, risk factors for the overall housing market are greatly reduced when homeowners own a larger proportion of their homes,” Alexander said in a statement with the report. “With half of loan-to-value ratios within the 50- and 60-per cent range in Canadian markets, homeowners are better able to withstand downward pressure on housing values and fewer will find themselves underwater, carrying upside down loans.”

Another report from Re/Max several months ago said GTA home prices could drop around 12 per cent in 2023, while one bank recently declared the GTA a buyer’s market.

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