Ottawa: Canada's ban on foreigners buying residential properties took effect on Sunday after the spike in home prices since the pandemic started, CNN Business reported.
The Canadian government passed this law as home prices surged after the start of the pandemic and some politicians also believed that buyers were responsible for snapping up the supply of homes as investments. The campaign site of Australian Prime Minister Justin Trudeau's party this past year wrote that the desirability of Canadian homes is attracting profiteers, wealthy corporations, and foreign investors. "This is leading to a real problem of underused and vacant housing, rampant speculation, and skyrocketing prices. Homes are for people, not investors," according to the campaign site.
In the law, an exception has been made for the immigrants and permanent residents of Canada who are not citizens, according to CNN Business.
But the steep rise in home prices in 2020 and 2021 was already reversed in 2022, well before the law took effect. Average home prices in Canada peaked just above USD 800,000 Canadian in February and have fallen steadily since then, dropping about 13 per cent from that peak, according to the Canadian Real Estate Association.
Canadian Bank is also responsible for price hikes as they are raising the interest rates, resulting in higher mortgage rates in the country, just like in the United States and other countries that have been hiking rates.
Canadian Real Estate Association's (CREA) price index is still up 38 per cent from the end of 2019, before the pandemic, but the group said that the inventory of homes for sale has returned to pre-pandemic levels, reported CNN Business.
The real estate association voiced concern about the law, even with the exemptions for people who intend to move to Canada. In a statement, the group said that Canada has built a reputation as a multicultural nation.
"As currently proposed, the prohibition on the purchase of residential property by non-Canadians can impact our reputation as a welcoming nation," said the group's statement. "The potential benefits of the ban are likely to be modest."
CREA also expressed concern that the ban could prompt retaliation by the United States and Mexico to prohibit purchases in those countries by Canadians, especially retirees looking for winter homes away from the Canadian winter, as per CNN Business report.
The group also said that they purchase vacation and residential properties in many countries, particularly in the US.
CREA said Canadians are the largest foreign purchasers of American properties, with more than half of the properties purchased by Canadians in Florida and Arizona.
"These provide Canadians with a place to spend the winter months and are a form of savings for Canadian retirees," said the group. "If Canada places a ban on Americans owning property in Canada, we should expect them to respond in kind," according to CNN Business.