Connect with us

Real eState

Not For Sale: Canada Closes The Door To Foreign Home Buyers

Published

 on

By Chris Sharpe and Manveer Sall

The federal government has introduced legislation that bans the purchase of residential real estate by non-Canadians.  The Prohibition on the Purchase of Residential Property by Non-Canadians Act (the “Act”) comes into force on January 1, 2023, and is stated to stay in force for a period of two years.

Buyers and sellers of residential property in Canada, together with their lawyers, notaries, and real estate agents, should make themselves aware of the prohibitions contained in the Act, the penalties for contravening the Act, and consider changes that may be required to purchase and sale agreements, closing documents, and record-keeping procedures related to their real estate transactions – and whether their transactions are even permitted at all.

Genius Dog 336 x 280 - Animated

Breaking Down the Act – Who is Prohibited from Purchasing Residential Property

Section 4(1) is the key effective provision of the Act, prohibiting a “non-Canadian” from purchasing, directly or indirectly, any residential property. The Act defines “non-Canadian” as:

(a) an individual who is neither a Canadian citizen nor a person registered as an Indian under the Indian Act nor a permanent resident;

(b) a corporation that is incorporated otherwise than under the laws of Canada or a province;

(c) a corporation incorporated under the laws of Canada or a province whose shares are not listed on a stock exchange in Canada for which a designation under section 262 of the Income Tax Act is in effect and that is controlled by a person referred to in paragraph (a) or (b); and

(d) a prescribed person or entity.

Importantly, “Control” of a corporation is not yet defined in the Act, but is to be defined by yet to be passed regulations.

Section 4(2) goes on to narrow the scope of the prohibition by excluding the following persons from the effect of Section 4(1):

(a) a temporary resident within the meaning of the Immigration and Refugee Protection Act who satisfies prescribed conditions;

(b) a protected person within the meaning of subsection 95(2) of the Immigration and Refugee Protection Act;

(c) an individual who is a non-Canadian and who purchases residential property in Canada with their spouse or common-law partner if the spouse or common law-partner is a Canadian citizen, person registered as an Indian under the Indian Act, permanent resident or person referred to in paragraph (a) or (b); or

(d) a person of a prescribed class of persons.

A temporary resident may include a foreign national who is permitted to enter or remain in Canada as a student, worker, or temporary resident permit holder.

Interestingly, these exceptions appear to open the door for temporary foreign workers and international students to continue purchasing residential real estate in Canada, provided they satisfy the (yet to be) prescribed conditions.

Breaking Down the Act – What is Residential Property

The prohibition on foreign buyers under the Act applies to “residential property”. Residential property is defined in the Act as, “any real property or immovable, other than a prescribed real property or immovable, that is situated in Canada and that is

(a) a detached house or similar building, containing not more than three dwelling units, together with that proportion of the appurtenances to the building and the land subjacent or immediately contiguous to the building that is reasonably necessary for its use and enjoyment as a place of residence for individuals;

(b) a part of a building that is a semi-detached house, rowhouse unit, residential condominium unit or other similar premises that is, or is intended to be, a separate parcel or other division of real property or immovable owned, or intended to be owned, apart from any other unit in the building, together with that proportion of any common areas and other appurtenances to the building and the land subjacent or immediately contiguous to the building that is attributable to the house, unit or premises and that is reasonably necessary for its use and enjoyment as a place of residence for individuals; or

(c) any prescribed real property or immovable.”

A “dwelling unit” is defined in the Act as “a residential unit that contains private kitchen facilities a private bath and a private living area.”

These definitions raise a number of interesting considerations, and types of properties that are excluded from the application of the Act. For example, a detached house with 4 or more dwelling units would fall outside the scope of the definition. So too do apartment buildings that are not part of a strata development, given that, while there are a number of dwelling units, they are not separately owned apart from the other units in the building.  Lastly, given the rise in the number of strata corporation wind-ups occurring throughout B.C., given that title to the strata corporation assets (being the strata lots, common property and common assets) tends to be consolidated prior to conveyance to the purchaser, these too may be exempted under the current language of the Act.

Breaking Down the Act – Penalty for Contravening the Act

Section 6(1) of the Act states that every non-Canadian, as well as any other person who counsels, induces, aids, or abets or even attempts to counsel, induce, aid or abet a non-Canadian to purchase a residential property in Canada is guilty of an offence and liable on summary conviction to a fine of not more than $10,000. Section 6(2) of the Act extends the liability and offence to the following persons that direct, authorize, assent, or acquiesces in, or participates in the commission of the offence:

(a) an officer, director or agent or mandatary of the corporation or entity;

(b) a senior official of the corporation or entity;

(c) any individual authorized to exercise managerial or supervisory functions on behalf of the corporation or entity.

Lawyers, notaries public, real estate agents and others involved in facilitating real estate transactions should consider the application of these penalties to their activites.

Comparison with the B.C. Additional Property Transfer Tax  

For those familiar with British Columbia’s Additional Property Transfer Tax (the “Foreign Buyer’s Tax”) on foreign entities, you might be wondering how its definition of a “foreign entity”, to which the Foreign Buyer’s Tax applies, compares to a “non-Canadian” who is prohibited from buying residential property under the Act.

The Foreign Buyer’s Tax applies to foreign entities, which includes both foreign nationals and foreign corporations. A foreign national means a person who is not a Canadian citizen or a permanent resident, and includes a stateless person. A foreign corporation is a corporation that is one of the following:

(a) a corporation that is not incorporated in Canada;

(b) unless the shares of the corporation are listed on a Canadian stock exchange, a corporation that is incorporated in Canada and is controlled by one or more of the following:

(i) a foreign national;

(ii) a corporation that is not incorporated in Canada;

(iii) a corporation that would, if each share of the corporation’s capital stock that is owned by a foreign national or by a corporation described in paragraph (a) of this definition were owned by a particular person, be controlled by the particular person;

Therefore, the ban on foreign buyers under the Act is less broad than the application of the Foreign Buyers Tax insofar as it does not prohibit the purchase of residential real estate by those parties exempted pursuant to Section 4(2) of the Act (including temporary residents, international students and temporary foreign workers).  In contrast, the Foreign Buyer’s Tax in B.C. has a broader scope as it applies to all individuals who are not Canadian citizens or permanent residents, including temporary residents.

Constitutional Implications

One potential issue that might arise with the Act is whether a party may raise a constitutional challenge by asserting that it touches on matters of provincial jurisdiction. Under s. 92 of the Constitution Act, 1867, property rights are within the exclusive powers of provincial legislatures.

The federal government may rely on their jurisdiction over criminal law to defend such a claim, but it of course remains to be seen whether any party mounts a constitutional challenge to the Act.

 Conclusion

The two-year prohibition on the purchase of residential property by non-Canadians will take effect on January 1, 2023. There are still many unknowns with respect to how and to whom the Act will apply. We anticipate that the federal government will provide further guidance about the Act in due time, at which point, more updates from the team at Clark Wilson will follow.

Source link

Continue Reading

Real eState

LACKIE: Buyers in driver's seat as sellers ride out real estate rough seas – Windsor Star

Published

 on


Article content

I got some blowback last week when I suggested that while quite clearly the housing market is in the throes of a strong correction, life and real estate continues on.

Advertisement 2

Article content

No, I was not shilling for my industry and, by extension, one might assume, my livelihood.

Genius Dog 336 x 280 - Animated

Article content

Yes, I still absolutely believe that things are rough and about to get rougher.

But notable to me is the fact that even amidst all of the scary headlines and all of the well-founded doom and gloom, there are still real estate deals happening in this city. And while as far as I can tell, the who and the how and the why has shifted from the who and the how and the why that drove that wild market that already feels like a distant memory, I’m not sure what we’re seeing should be written-off as anecdotal outliers.

Transaction volume is down by half compared to this time last year. Interest rates currently stand at levels inconceivable less than a year ago. New homeowners are stressed, would-be home buyers are spooked, and everyone else is trying to figure out how worried they need to be.

Advertisement 3

Article content

Yes, yes and yes.

  1. Real estate for-sale sign.

    https://torontosun.com/opinion/columnists/lackie-good-homes-still-selling-amid-turbulent-real-estate-market

  2. Ontario Premier Doug Ford and Minister of Municipal Affairs and Housing Steve Clark, address media outside of the Premier's office at Queen's Park in Toronto, Ont. on Monday, May 27, 2019.

    LACKIE: Can housing crisis be fixed by tapping into the Greenbelt?

  3. A real estate sign is displayed in front of a house in the Riverdale area of Toronto on Wednesday, Sept. 29, 2021.

    LACKIE: Real estate market looking more like ‘crash’ than ‘correction’

But here’s what I am observing in real time: buyers are absolutely still out there.

Our transaction volume may be down by half, but the remaining half of what was truly record-levels is not inconsequential. It maybe just feels that way.

Case in point: I listed an adorable house in a central Toronto neighbourhood last week. The perfect starter home for first-time buyers. It would have been an absolute bun fight last winter.

I wasn’t sure how it would go. And because of that, I left nothing to chance. We shined her up, I spent a small fortune on staging, the photos were perfect. We did all the things.

Advertisement 4

Article content

I also spent a lot of time managing expectations. All we need is one buyer, I explained to my clients — just one.

Never would I have guessed that we would end up with twenty-five groups braving the miserable cold to come to the open house. And these weren’t people just out killing time on a Sunday. These were buyers, with parents in tow, and home inspection reports in hand, armed with their questions and their critical eye. The same buyers that are supposedly priced out or debilitated by the fear of catching falling knives.

RECOMMENDED VIDEO

We apologize, but this video has failed to load.

Offer night yielded four offers. But unlike the offer nights of days prior, these prospective buyers weren’t armed with letters to the sellers and waving their bank drafts around. They were cool. They had conditions. And their numbers were conservative. Even in competition.

Advertisement 5

Article content

The house sold for less than I expected, but with the four offers the market was clearly speaking and my clients were willing to listen.

And this experience tracks with what I am hearing from my colleagues: the buyers still out there will participate at the right price. They will come forward when they’re good and ready. There is no FOMO. They will offer on things, sure, but will walk if it’s not right for them.

And this will be how the prices continue to grind downwards.

So while yes, the market has slowed right down, I wonder if the stasis is also due to the logjam of sellers determined to wait out these unfavourable conditions.

I suspect that once reluctant acceptance of new-new normal settles in, we will see inventory rise and sales volume increase. But I feel pretty confident in saying that it will be quite a long time before sellers leave the table feeling like heroes again.

@brynnlackie

Comments

Postmedia is committed to maintaining a lively but civil forum for discussion and encourage all readers to share their views on our articles. Comments may take up to an hour for moderation before appearing on the site. We ask you to keep your comments relevant and respectful. We have enabled email notifications—you will now receive an email if you receive a reply to your comment, there is an update to a comment thread you follow or if a user you follow comments. Visit our Community Guidelines for more information and details on how to adjust your email settings.

Adblock test (Why?)



Source link

Continue Reading

Real eState

Real Estate Trends: Homebuilder Sentiment Drops Along With Housing Prices

Published

 on

 

Key Takeaways

  • Home builder sentiment, measured by the National Association of Home Builders, fell in October.
  • The report indicates that home builder sentiment has fallen for 10 consecutive months.
  • The housing market is facing multiple challenges, including relatively high mortgage rates and inflationary pressure on household budgets.

If you’ve been paying attention to the housing market, you’ve likely noticed the relatively bumpy ride it’s had over the last couple of years. After rock-bottom mortgage rates contributed to seemingly endless bidding wars throughout 2020 and 2021, the lightning-hot market has cooled in recent months.

The latest homebuilder sentiment report reflects a slower housing market. Let’s take a closer look at the highlights of changing homebuilder sentiment and falling housing prices.

Genius Dog 336 x 280 - Animated

Homebuilder Sentiment Drops

The National Association of Home Builders (NAHB) takes the temperature of home builders’ sentiment on a monthly basis. In the latest report, home builder sentiment dropped again. The confidence was reflected at 38 in October, which means it’s at half the level it was 6 months ago.

That represents 10 consecutive months of dropping home builder sentiment. With the exception of the uncertain times of spring 2020, this confidence reading is the lowest it has been since August 2012.

“This will be the first year since 2011 to see a decline for single-family starts,” said Robert Deitz, NAHB Chief Economist in a press release. “Given expectations for ongoing elevated interest rates due to actions by the Federal Reserve, 2023 is forecasted to see additional single-family building declines as the housing contraction continues.”

Housing price trends

As of November, Redfin reported the national median home sale price at $397,549. That’s a 4.9% year-over-year increase. While that might seem like a steep climb, housing price growth has actually slowed down quite a bit.

Home builders aren’t the only ones warning of a potential fall in home prices. Some economists are predicting a sharp fall. The Federal Reserve is warning that home prices might fall, but it doesn’t expect anything like the unforgettable housing market crash that happened during the Great Recession.

Potential reasons for housing market changes

With home builder sentiment dropping like a rock, it’s helpful to understand what factors are at play. There are many factors contributing to a changing housing market. Here’s a closer look at the reasons that stand out.

Hot inflation

In recent months, inflation has been a main feature of the economy.

The Consumer Price Index (CPI), a popular measure of inflation, was sitting at a 7.7% year-over-year increase in the October 2022 report. Although this reflects a gradual decline from the peak earlier in the year, we are still living in highly inflationary times.

But you probably don’t need to look at a special report to know that inflation is present in a big way. You’ve likely noticed inflation as it hits your household budget. Individuals and families across the nation are forced to spend more on basics like food and electricity.

With this pressure on household budgets, it’s difficult for many would-be homeowners to pull together the funds necessary for a down payment on a home. Plus, the increased costs in other areas of their budget might make shelling out for an expensive monthly mortgage payment impossible.

Rising interest rates

In response to sky-high inflation, the Federal Reserve has been aggressively tackling the problem. Although the central bank prefers to have some level of inflation in the economy, the current inflation rate is well above the 2% target.

The Federal Reserve increases the federal funds rate when it wants to tame inflation. Throughout 2022, the Fed has instituted a series of rate hikes. As the federal funds rate increases, so do borrowing costs for homeowners.

Mortgage interest rates hit a 2022 peak of 7.08% for a 30-year fixed-rate mortgage. Since then, mortgage rates have fallen a bit. As of November 18, mortgage interest rates are down to 6.61%. But regardless of this small tumble, mortgage rates are still significantly higher than this time last year when the average interest rate on a 30-year fixed-rate mortgage was 3.10%.

Higher mortgage interest rates lead to higher monthly payments for borrowers. The National Association of Realtors reported that the average monthly payment for a homebuyer in the third quarter of 2022 was $1,840. That’s significantly more than the $1,226 average in the third quarter of 2021.

Higher mortgage costs often mean that buyers can’t afford as high of a sales price. With this factor in play, the possibility of falling housing prices seems to make sense as would-be homebuyers are getting priced out of the market.

How This Impacts Your Investment Portfolio

The housing market isn’t the only sector of the economy impacted by a combination of hot inflation and rising interest rates. As the real estate market shifts around us, you might be interested in adding this exposure to this asset class to your portfolio. But you might not be interested in monitoring the minutiae of the up-and-down housing market trend.

One way to add exposure to real estate trends is by harnessing the power of artificial intelligence through a Q.ai Investment Kit. For example, the Global Trends kit takes real estate into account when making trades that align with your portfolio goals. Consider using this new style of investment technology today.

Source link

Continue Reading

Real eState

Buyers in driver’s seat as sellers ride out real estate rough seas

Published

 on

I got some blowback last week when I suggested that while quite clearly the housing market is in the throes of a strong correction, life and real estate continues on.

No, I was not shilling for my industry and, by extension, one might assume, my livelihood.

Yes, I still absolutely believe that things are rough and about to get rougher.

Genius Dog 336 x 280 - Animated

But notable to me is the fact that even amidst all of the scary headlines and all of the well-founded doom and gloom, there are still real estate deals happening in this city. And while as far as I can tell, the who and the how and the why has shifted from the who and the how and the why that drove that wild market that already feels like a distant memory, I’m not sure what we’re seeing should be written-off as anecdotal outliers.

Transaction volume is down by half compared to this time last year. Interest rates currently stand at levels inconceivable less than a year ago. New homeowners are stressed, would-be home buyers are spooked, and everyone else is trying to figure out how worried they need to be.

 

But here’s what I am observing in real time: buyers are absolutely still out there.

Our transaction volume may be down by half, but the remaining half of what was truly record-levels is not inconsequential. It maybe just feels that way.

Case in point: I listed an adorable house in a central Toronto neighbourhood last week. The perfect starter home for first-time buyers. It would have been an absolute bun fight last winter.

I wasn’t sure how it would go. And because of that, I left nothing to chance. We shined her up, I spent a small fortune on staging, the photos were perfect. We did all the things.

I also spent a lot of time managing expectations. All we need is one buyer, I explained to my clients — just one.

Never would I have guessed that we would end up with twenty-five groups braving the miserable cold to come to the open house. And these weren’t people just out killing time on a Sunday. These were buyers, with parents in tow, and home inspection reports in hand, armed with their questions and their critical eye. The same buyers that are supposedly priced out or debilitated by the fear of catching falling knives.

Offer night yielded four offers. But unlike the offer nights of days prior, these prospective buyers weren’t armed with letters to the sellers and waving their bank drafts around. They were cool. They had conditions. And their numbers were conservative. Even in competition.

The house sold for less than I expected, but with the four offers the market was clearly speaking and my clients were willing to listen.

And this experience tracks with what I am hearing from my colleagues: the buyers still out there will participate at the right price. They will come forward when they’re good and ready. There is no FOMO. They will offer on things, sure, but will walk if it’s not right for them.

And this will be how the prices continue to grind downwards.

So while yes, the market has slowed right down, I wonder if the stasis is also due to the logjam of sellers determined to wait out these unfavourable conditions.

I suspect that once reluctant acceptance of new-new normal settles in, we will see inventory rise and sales volume increase. But I feel pretty confident in saying that it will be quite a long time before sellers leave the table feeling like heroes again.

@brynnlackie

Source link

Continue Reading

Trending