On April 7, 2022, the Canadian federal government tabled the annual 2022 Federal Budget, including a $10.14 billion housing investment over the next five years. It includes several policies that aim to address housing affordability and escalating home prices, which can affect buyers and sellers in Canada. It is important to note that all policy details, including how they might be implemented, are still to be revealed and approved.
We’ve provided preliminary highlights of the policies that would have the most impact on the residential real estate industry:
Foreign Buyers Ban
The government announced plans to explore a two-year foreign buyers ban, and proposed to apply this to condominiums, apartments, and single residential properties. Permanent residents, foreign workers, and students would be excluded from this new measure. Foreigners who are purchasing their primary residence here in Canada will be exempt. If passed, this policy change could give the government powers to prescribe penalties and potential judicial powers.
How this policy could affect you:
- The Canadian real estate market is overwhelmingly driven by strong local demand and housing needs, populations gains, and immigration, coupled with a decades-long deficit of inventory. As a result, Sotheby’s International Realty Canada does not see foreign-demand side policies as having a substantial impact on housing prices or the market value of real estate or a long-term home investment.
- Even though they will be excluded from this policy change, this policy is already confusing for potential new Canadian permanent residents, foreign workers and students, at a time when Canada is aiming to attract talent to support local economies and innovation.
The Federal Budget precipitates plans to explore a “Home Buyers’ Bill of Rights.” As part of this, blind bidding, the practice that prevents bidders from knowing the bids of other prospective buyers, may be banned.
Notably, on April 6, 2022, the Canadian Real Estate Association (CREA) announced a pilot project that will display real-time tracking of offers on REALTOR.ca listings, a first for Canada using an innovative offer management software provided by property technology company Openn Negotiation.
How this policy could affect you:
- As real estate agents and brokers, we understand that bidding wars can be stressful and discouraging for our home buyer clients. We acknowledge that enabling prospective buyers to know other bids can alleviate some of the unknowns and stress.
- However, we also know that for Canadian homeowners and home sellers, blind bidding enables them to sell their home at an optimal price that reflects current market conditions.
- It is important to note that the overall goal of this policy is to reduce price escalation for specific homes and the housing market. We are not convinced that banning blind bidding will achieve this goal. Open bidding is still bidding, and in countries like Australia where they have implemented open bidding, housing prices continue to rise.
- We also have questions and concerns about the logistics of implementing such a policy and look forward to learning more about technology-enabled multiple offer management through CREA.
Other Key Measures
- Housing Accelerator Fund: the budget introduces a $4 billion Housing Accelerator Fund, run by the Canada Mortgage and Housing Corp. (CMHC), with the goal of creating 100,000 net new housing units over the next five years.
- New Housing Construction: the budget allows for $1 billion for the construction of affordable housing units, $1.5 billion in loans and funding for co-op housing, as well as other incentives for municipalities to speed up development approvals for new builds.
- Tax-Free First Home Savings Account: first-time homebuyers will be able to save $8,000 per year to a maximum of $40,000 per person towards the purchase of a first home. Like a retirement savings plan, contributions and withdrawals would be non-taxable.
Have More Questions About the Canadian Real Estate Market?
More information on these policies will be shared in the coming weeks as details become available. If you have any specific questions, our real estate experts are available to provide you with specialized market insight and strategic advice and can aid you when making your next real estate endeavour.
Featured Image by R Architecture via Unsplash