The Canadian government is once again making international headlines with an announcement about banning some foreign buyer from buying real estate for the next two years. The move comes as an effort to cool the nation’s hot housing market, after prices have risen more than 20% in many areas in the past year. Rental prices have also increased.
The new rules have exemptions for permanent residents and foreign students and workers, as well as people buying a primary residence.
Analysts are divided about the impact this temporary ban will have on housing prices, however. There is limited data on the exact number of homes purchased by foreign investors in Canada, but experts say it is a relatively low percentage of the overall market.
One analyst from Bullpenn Research & Consulting, for example, estimated that just 1% of homes purchased in 2020 were from foreign buyers compared to about 9% in 2015 and 2016. Instead, rising populations and a shortage of supply are seen as the driving forces behind price increases.
New Zealand introduced a similar measure banning foreign buyers in 2018, with varying results on the real estate market.
Other factors like rising interest rates are expected to also impact the housing market prices.