How much will Canada’s block on foreign buyers help its housing crisis?

NPR
Saturday 21 May 2022

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The average home price in Canada has skyrocketed to over $800,000. Globe and Mail property reporter Rachelle Younglai tells NPR’s Sacha Pfeiffer how Parliament hopes to address the crisis.

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SACHA PFEIFFER, HOST:

At the beginning of the program we talked about the challenges of buying a home in the United States right now in Canada. There is also a housing shortage. Real estate prices there have risen into the stratosphere. As a result, Canada’s federal government made a proposal in its state budget this spring to address the problem — a two-year ban on home sales to foreign buyers. But how would a ban on foreigners buying houses in Canada affect the Canadian real estate market? We’re going to ask this question to Rachelle Younglai. She covers real estate for Globe and Mail in Toronto. Hello Michelle.

RACHELLE YOUNGLAI: Hello.

PFEIFFER: Rachelle, the housing market here in the USA is also awesome. If you’re a seller, you’re probably lucky. If you’re a shopper, chances are you’re demoralized. Can you give us a sense of how the market is in Canada including whether this is just a big city issue or is it everywhere?

YOUNGLAI: It’s a pervasive problem. It’s a national problem. Real estate prices have increased by 50% in the last two years. The typical home price in Canada nationwide is over $800,000. It’s a huge problem. And that’s what we’re dealing with right now.

PFEIFFER: Canadian Prime Minister Justin Trudeau wants to exclude foreign buyers from the market. But how much of Canada’s housing market is owned by foreign buyers anyway? And would you expect such a ban to have any real impact?

YOUNGLAI: Well, the latest data shows that foreign owners own a very small proportion of the housing stock. In Ontario, for example, they own 2.2% of the homes. In British Columbia they own 3.1%. That was 2020 data, so it’s a very, very small fraction. And we also have the notion that domestic buyers, Canadian buyers, are behind the recent housing boom, not foreign buyers. So I would say that this ban will not have a big impact on property prices here.

PFEIFFER: Then why should the country propose this ban at all?

YOUNGLAI: I find it politically convenient because foreigners can’t vote here. You are an easy scapegoat. And I think that’s one of the main reasons.

PFEIFFER: Rachelle, here in the US, people who are depressed by American politics sometimes, maybe not always — maybe they mean it — joke that they want to move to Canada. When these people hear about this proposed ban, they may think their window of opportunity is closing. But this proposal has many loopholes. So isn’t it as draconian as it sounds?

YOUNGLAI: Oh yeah sure. I mean there are many exceptions. For example, if you are a foreign student and intend to make Canada your home, you are allowed to buy. If you are a foreign worker with a visa, you can also buy. If you are married to a Canadian you can buy. And besides, it’s a two-year ban. So you could always wait. And the other thing is, it’s not even — it’s not law yet.

PFEIFFER: It’s another suggestion.

YOUNGLAI: It’s still a suggestion. Right.

PFEIFFER: Very interesting. I mean, like you say, it sounds like it’s not as scary as the headline makes it out to be. And if foreigners are unlikely to be banned from buying houses in Canada, freeing up more houses, unlikely to lower prices, and it’s more of a domestic issue, then what else would the Canadian government do to help? Because I’ve read, for example, that there are also proposals to boost construction and help first-time homebuyers save for a down payment. Anything else on the table?

YOUNGLAI: Yes. They have another plan to prevent people from flipping their houses. So you have a suggestion to tax you if you sell your house within a year of buying it. So that’s a plan. You mentioned the construction push. One of their plans is to double the building speed or try to speed it up. It is also not entirely clear whether this is possible because, like your country, we are struggling with a shortage of workers, especially in the trades. Even if cities were on board to increase the pace of construction, there’s no one doing the work.

PFEIFFER: And it also sounds as if none of these are quick fixes that make the home market, the housing market, more accessible overnight. So I have a broader question for you: if homeownership is a goal in an ideal for so many people, I mean here in the US it’s central to the concept of the American dream, Canadians just need to lower their expectations, one day Own your own home and consider renting a good long-term option?

YOUNGLAI: Yes, sure. Certainly. I mean it’s a big goal for Canadians too. Most Canadians don’t want to rent. You want to own. And people are always talking about how we should look at Europe. People rent and they’re fine with it. But Canadians don’t approve of renting. You want to own. So yes, it’s a rethink. We’re definitely not that far yet.

PFEIFFER: Rachelle Younglai is a reporter at the Globe and Mail. Thank you for talking about this.

YOUNGLAI: Thank you. Transcript provided by NPR, Copyright NPR.

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