Canada is one of the friendliest countries in the world and a dream destination for international students, determined workers, and international investors. However, it has issued a new law that took effect on January 1st, 2023, regarding foreigners’ rights to invest in the Canadian real estate market. This has left many people questioning the reason behind this decision: is it to help ease the housing crisis in Canada? And whether or not Canada is still a welcoming country for foreigners.
So let us answer some of your questions on who will be affected by this law, how it will affect the housing issue and real estate market, and alternatives for foreign investors.
Since COVID-19, home prices in Canada and worldwide have seen a sharp increase; sided by the recent inflation rates and the unstable international economy, it only made matters worse and raised people’s concerns over housing affordability. According to the Financial Post 62.7% of household income is required to cover home ownership costs on average; meanwhile, in cities like Toronto, you need at least to put 85% to keep a roof above your head. This record-breaking number is scary for the people who are living on paychecks, and with high-interest rates, mortgages are not really an option; for example, the Bank of Canada’s key interest rates reached 4.25%, which is the highest since the 2008 economic recession.
But what do all these numbers have to do with real estate foreign investment and the new Canadian laws?
The Canadian government’s response to the current housing crisis was adopting a new policy under the name of the Prohibition on the purchase of Residential Property by Non-Canadians Act. To simplify it, this act means that most non-Canadians with some exemptions are banned for two years from purchasing any residential properties in big cities. The exemptions include international students, permanent residents, refugees, spouses, or common-law partners of Canadian citizens and diplomats.
The reasoning behind this ban is that Canadian homes should be for living and not for investment. This logic has left many critics pointing out all the missed solutions that the government could have chosen to apply. One article in the New York Times The data at the British Columbia Ministry of Finance suggests that foreign investment in Canadian real estate plunged from 9% of residential sales in 2016 to 1% in 2022. Realtors who are shocked by this decision claim that foreign investors are not the main cause behind the rising of home prices, shifting the blame to the short supply of government housing projects. But whether or not this is the right approach it does not change the fact that Trudeau’s cabinet is facing immense backlash from the real estate community as it has left them in a frenzy; many realtors stated that their clients are left with no other choice but to wait out the 2 years ban.
Except that real estate investment opportunities are not only limited to Canada, even with the rising desirability of Canadian properties, but some investors also cannot wait out this ban, so if you are an investor and looking for an alternative country to invest in, Turkey could be worth your money.
Whereas the average price of properties in Toronto reached 1.051.216$ last December, as stated by Toronto Regional Real Estate Board, in Istanbul, the average property price is around 400.000$. Turkey has been investing in the real estate market for several years now, with many upscale projects that have attracted investors from around the world, generating 57% of foreign direct investment in 2020 alone. Also, with many urban regeneration areas, an advantageous Turkish Citizenship program, plus a charming Mediterranean weather, you can actually double your profits instead of wasting two years for the Canadian ban to pass.
We invite you to discover more about Turkey’s real estate market by reading more of our articles.