Temporary residents may still be able to buy a house in Canada if they meet certain conditions under the new regulations
The parliament passed the Prohibition against the Purchase of residential property from Non-Canadians Act in June 2022. It went into force on January 1 this year.
In general, the new rules will ban the Purchase of residence by anyone who is an investor from outside Canada who isn’t a Canadian citizen or a permanent resident. The regulations will be in effect for two years and, after that, be automatically canceled.
The Act specifically bans foreign commercial entities and persons who aren’t Canadian citizens or permanent residents from purchasing residential properties that are not for recreation in Canada.
Residential property can include detached homes or similar buildings, semi-detached or detached houses, rowhouse units, residential condominium units, and similar properties.
The government announced this Act during Budget 2022 as part of Canada’s strategy to cut down on costs of living which have risen in recent years.
The Canadian Real Estate Association (CREA) data shows that a house’s median price soared in February 2022 to $816,720. The price has since fallen to $632,802 in November 2022. However, it is still considered a high price, which makes owning a home out of possibility for many, as the median Canadian earnings were just $58,800 as of 2021.
The government has mentioned foreign investors purchasing houses in Canada and never living there as a major factor in the rise of prices for houses for sale in residential areas.
What are the other exceptions?
The new Act does not provide a blanket restriction on purchasing properties from foreign investors. They can still purchase properties for recreational purposes, such as cottages or vacation houses. Properties that have more than three distinct units are also exempt.
Furthermore, The Act does not cover properties that aren’t part of the census metropolitan areas (cities with populations greater than 100k).
Other exceptions are available for non-Canadians purchasing the home with the help of a Canadian family member or common-law partner who is later in a transition situation, for example, divorce, or any non-Canadian inheriting a home in the event of an estate sale or death.
Can temporary residents purchase a house in Canada?
The Act does not apply to Canadian permanent or citizen residents. Temporary residents with valid work or study permits can purchase a property in Canada. However, there are a few requirements for temporary residents since the government demands evidence of intent to be a permanent resident before they can be settled.
For instance, a student who is participating in the course of study that is authorized at an institution of learning that is a Canadian-recognized learning institution must satisfy at least some of the following requirements:
- They filed all the required income tax returns under the Income Tax Act for each of the five tax years preceding the year they made the acquisition.
- The purchaser was physically located in Canada for at least 244 days during the five years before the year in which the Purchase took place.
- The cost of purchasing a residential property does not exceed $500,000 and
- They have yet to buy at least one residence.
That means anyone who lives in Canada and has an academic permit that wants to buy a home has to be able to prove that they resided in Canada for 244 days a year during the last five years before the Purchase. They must also show proof of filing taxes in Canada for the same period.
The maximum cost for a home is likely not enough to purchase a house within Ontario and British Columbia, where the average house cost is more than $800,000. And the housing market is the most severe.
People who are currently in Canada with a valid working permit are also subject to conditions they must satisfy, including:
- They were employed within Canada for at least three years in the preceding four years before the year that they purchased the item in the case full-time, as defined by subsection 73(1) of the Immigration and Refugee Protection Regulations (IRPA).
- They filed all the required income tax returns as required under the Income Tax Act for a minimum of three of the taxation years that preceded the year when it was purchased and
- They have yet to buy at least one residence.
In this case, the amount of duration of time that is spent in Canada is lower than that of students. However, those with a work permit are required to prove at minimum three years of full-time work and tax returns from the preceding four years.
The Act also states that the non-Canadian has the responsibility of proving their ability to be a Canadian realtor. Temporary residents must pay the cost of getting proof of eligibility, including retrieving documents regarding working permits and notices of appraisal. They may also require documents to show a physical presence within Canada, such as a lease agreement, utility bill, or entry and exit documents to Canada.
What is the penalty?
Foreign investors who find an opportunity to purchase an unpermitted residential property in Canada or who do not know how to assist those who do will be guilty of an offense and could be punished with an amount of up to $10,000. Furthermore, the superior judge of the province where the house is located could order the property to be transferred to a buyer.
