'The damage is real' — Foreign homebuyer ban causing upheaval in real estate industry | Canada News Media
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‘The damage is real’ — Foreign homebuyer ban causing upheaval in real estate industry

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The federal government’s foreign homebuyer ban was designed to improve housing affordability, but a major flaw in the legislation is causing more harm than good, according to the Canadian Imperial Bank of Commerce.

The ban, which blocks non-Canadians from buying residential property — either directly or indirectly — for two years, came into effect on Jan. 1. The Prohibition on the Purchase of Residential Property by Non-Canadians Act, as it is officially known, was meant to take some pressure off home prices amid an affordability crisis only made worse by the rising cost of living brought on by inflation and elevated interest rates. But, there’s a problem: The language used in the Act is causing issues, and it’s stopping real estate development — necessary to boost housing supply and address affordability — in its tracks, Benjamin Tal of CIBC economics said in a note.

“The language of the Act appears straightforward until you show it to a lawyer,” he said.

For one, the words “residential property” legally capture far more property types than lawmakers likely intended. While homes such as detached, semi-detached, row houses and condominiums fall under that category, so does land. Vacant or developed land that doesn’t house a habitable structure, is zoned for residential or mixed use, and located within a metropolitan area, is included under that definition, CIBC said. As a result, any commercial property in such a zone would be banned from being owned by a non-Canadian.

“The entire area of downtown Toronto falls under that category,” Tal said.

Further, the definition of “non-Canadian” is also a source of problems. Corporations are considered non-Canadian under the Act if they have foreign ownership of at least three per cent. But though the Act excludes companies listed on a Canadian stock exchange from being affected, it fails to exclude real estate investment trusts (REITs) — important builders of residential property such as apartments. That means most publicly traded Canadian REITS are therefore considered “foreign entities,” the note said. As a result, many REITs risk being blocked from building much-needed new housing.

Even the word “purchase” is a cause for issues. Because the term includes direct and indirect purchases, the Act effectively bans foreigners from acquiring leases or mortgages on residential dwellings. Buying shares is also included, meaning non-Canadians could be blocked from investing in units of a REIT that owns residential assets.

The end result has brought upheaval to the real estate industry and caused even commercial deals, with no ties to residential homes, to be cancelled or held back.

“The damage is real,” Tal said. “Developers that are partly foreign owned or rely on foreign equity cannot proceed with purpose built developments that, in our view, are the most effective tool to tackle Canada’s housing affordability crisis.”

The implications could even stretch beyond the real estate industry, he warned. For example, companies with a minority non-Canadian investor could be blocked from buying shares in a company that happens to reside on land zoned for mixed or residential use.

Tal urged the government to take action to rectify all the problems the wording in the legislation has unintentionally created.

“Policymakers should immediately take another look and amend the Act in a way that is consistent with what it was intended to achieve — focusing only on single units being purchased by foreigners while exempting development of new supply from the impact of the new legislation,” he said.

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The Canadian economy recorded no growth in the final three months of 2022, massively underperforming expectations, though economic activity likely rebounded with a 0.3 per cent increase in January, Statistics Canada data showed on Feb. 28.

The 0.0 per cent growth reading in fourth-quarter gross domestic product capped five consecutive quarterly increases and missed analysts’ average forecast of a 1.5 per cent rise. It was also well below the Bank of Canada’s forecast for 1.3 per cent annualized GDP growth in the quarter.

That might mean Canada is headed for recession after all, writes Kevin Carmichael. The data will also be welcome news for Bank of Canada governor Tiff Macklem. Read Carmichael’s analysis here.

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Greater Toronto home sales jump in October after Bank of Canada rate cuts: board

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TORONTO – The Toronto Regional Real Estate Board says home sales in October surged as buyers continued moving off the sidelines amid lower interest rates.

The board said 6,658 homes changed hands last month in the Greater Toronto Area, up 44.4 per cent compared with 4,611 in the same month last year. Sales were up 14 per cent from September on a seasonally adjusted basis.

The average selling price was up 1.1 per cent compared with a year earlier at $1,135,215. The composite benchmark price, meant to represent the typical home, was down 3.3 per cent year-over-year.

“While we are still early in the Bank of Canada’s rate cutting cycle, it definitely does appear that an increasing number of buyers moved off the sidelines and back into the marketplace in October,” said TRREB president Jennifer Pearce in a news release.

“The positive affordability picture brought about by lower borrowing costs and relatively flat home prices prompted this improvement in market activity.”

The Bank of Canada has slashed its key interest rate four times since June, including a half-percentage point cut on Oct. 23. The rate now stands at 3.75 per cent, down from the high of five per cent that deterred many would-be buyers from the housing market.

New listings last month totalled 15,328, up 4.3 per cent from a year earlier.

In the City of Toronto, there were 2,509 sales last month, a 37.6 per cent jump from October 2023. Throughout the rest of the GTA, home sales rose 48.9 per cent to 4,149.

The sales uptick is encouraging, said Cameron Forbes, general manager and broker for Re/Max Realtron Realty Inc., who added the figures for October were stronger than he anticipated.

“I thought they’d be up for sure, but not necessarily that much,” said Forbes.

“Obviously, the 50 basis points was certainly a great move in the right direction. I just thought it would take more to get things going.”

He said it shows confidence in the market is returning faster than expected, especially among existing homeowners looking for a new property.

“The average consumer who’s employed and may have been able to get some increases in their wages over the last little bit to make up some ground with inflation, I think they’re confident, so they’re looking in the market.

“The conditions are nice because you’ve got a little more time, you’ve got more choice, you’ve got fewer other buyers to compete against.”

All property types saw more sales in October compared with a year ago throughout the GTA.

Townhouses led the surge with 56.8 per cent more sales, followed by detached homes at 46.6 per cent and semi-detached homes at 44 per cent. There were 33.4 per cent more condos that changed hands year-over-year.

“Market conditions did tighten in October, but there is still a lot of inventory and therefore choice for homebuyers,” said TRREB chief market analyst Jason Mercer.

“This choice will keep home price growth moderate over the next few months. However, as inventory is absorbed and home construction continues to lag population growth, selling price growth will accelerate, likely as we move through the spring of 2025.”

This report by The Canadian Press was first published Nov. 6, 2024.

The Canadian Press. All rights reserved.

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Homelessness: Tiny home village to open next week in Halifax suburb

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HALIFAX – A village of tiny homes is set to open next month in a Halifax suburb, the latest project by the provincial government to address homelessness.

Located in Lower Sackville, N.S., the tiny home community will house up to 34 people when the first 26 units open Nov. 4.

Another 35 people are scheduled to move in when construction on another 29 units should be complete in December, under a partnership between the province, the Halifax Regional Municipality, United Way Halifax, The Shaw Group and Dexter Construction.

The province invested $9.4 million to build the village and will contribute $935,000 annually for operating costs.

Residents have been chosen from a list of people experiencing homelessness maintained by the Affordable Housing Association of Nova Scotia.

They will pay rent that is tied to their income for a unit that is fully furnished with a private bathroom, shower and a kitchen equipped with a cooktop, small fridge and microwave.

The Atlantic Community Shelters Society will also provide support to residents, ranging from counselling and mental health supports to employment and educational services.

This report by The Canadian Press was first published Oct. 24, 2024.

The Canadian Press. All rights reserved.

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Here are some facts about British Columbia’s housing market

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Housing affordability is a key issue in the provincial election campaign in British Columbia, particularly in major centres.

Here are some statistics about housing in B.C. from the Canada Mortgage and Housing Corporation’s 2024 Rental Market Report, issued in January, and the B.C. Real Estate Association’s August 2024 report.

Average residential home price in B.C.: $938,500

Average price in greater Vancouver (2024 year to date): $1,304,438

Average price in greater Victoria (2024 year to date): $979,103

Average price in the Okanagan (2024 year to date): $748,015

Average two-bedroom purpose-built rental in Vancouver: $2,181

Average two-bedroom purpose-built rental in Victoria: $1,839

Average two-bedroom purpose-built rental in Canada: $1,359

Rental vacancy rate in Vancouver: 0.9 per cent

How much more do new renters in Vancouver pay compared with renters who have occupied their home for at least a year: 27 per cent

This report by The Canadian Press was first published Oct. 17, 2024.

The Canadian Press. All rights reserved.

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