Saturday, May 18, 2024
HomeWorldU.S. border citizens buy up Canadian recreational properties ahead of foreign buyer...

U.S. border citizens buy up Canadian recreational properties ahead of foreign buyer ban

U.S. citizens are flocking to buy recreational properties in Canada following Ottawa’s announcement of a two-year ban that will prohibit the purchase of residential property by non-Canadians.

Around 75 per cent of U.S. citizens living in border states who currently own recreational property — a ski chalet or cottage, for example — in Canada made their purchase after the two-year foreign buyer ban was announced in April, according to a new Royal LePage survey.

Parliament passed legislation, effective beginning Jan. 1, 2023, in June.

Among those who do not currently own a recreational property in Canada but plan to make a purchase, 67 per cent said the current strength of the U.S. dollar has made them more inclined to buy north of the border. According to survey respondents, the primary reasons for wanting to purchase a home in Canada are for retirement, investment and multi-season use.

“We have great ski locations in B.C. and Quebec, and U.S. buyers in border states have a great selection of places to go,” said Pauline Aunger of Royal LePage Advantage Real Estate.

Despite the rush to scoop up property, it’s still not known whether recreational properties will be exempt from the federal legislation.

“The full regulations will be made available soon,” said Claudie Chabot, spokesperson for Canada Mortgage and Housing Corporation, when asked if recreational properties will be exempt.

The Canadian dollar is worth 74 cents to the U.S. dollar, making Canadian property attractive to Americans, even with higher interest rates.

“If this report is a sign that the ban will be effective, then we could assume it could be responsible for some of the strength we saw in the Canadian market in 2022,” said Daniel Foch, GTA broker and host of the Canadian Real Estate Investor podcast.

The report also shows the strength in the recreational property sector, which is exempt from the foreign homebuyer tax. In 2016, home prices dropped drastically after the tax was introduced in B.C. The same happened in 2017 in Ontario after the tax was introduced. In Toronto, home prices dropped by six per cent after the tax came into effect.

“What we could be seeing is a flight to untaxed markets,” Foch said. “By taxing foreign homebuyers’ residential properties, it can then give strength to this (recreational) market.”

Even though foreign homebuyers make up small percentage of homeowners in Canada, the foreign homebuyer tax made a sizable dent in foreign homebuyer investment from five per cent to 3.5 per cent, since the tax passed in B.C. and Ontario.

However, Sheila Block, senior economist at the Canadian Centre for Policy Alternatives, said the survey does not show how effective the ban will be as the sample is relatively small — 1,506 people participated — and it only surveys U.S. citizens living in border states.

“This is a small survey looking at a particular segment of the housing market,” she said.

Also, 70 per cent of the homebuyers surveyed are dual citizens or have a spouse who is Canadian, which skews the results because it’s not only looking at U.S. citizens, she added.

And since the federal government made the foreign homebuyer ban announcement, the housing market has cooled drastically from higher interest rates, which have seen sales and listings drop significantly.

“Higher interest rates are a much more effective tool to cool the housing market, not the ban, which impacts very few homeowners,” Block said.

Buyers in the margins, like foreign homebuyers, are easy to underestimate, Foch said.

“If you take the person out of the market who is willing to pay the most for a property, it will impact prices, which is what we saw in 2016 and 2017,” he said.

Sometimes people who invest in property not in their home country are doing so to make a profit, or evade taxes, which drives up the cost of housing, he said.

“If you take the craziest buyer out of the market, the prices come down,” Foch said.

The online survey of 1,506 U.S. citizens over the age of 18 living in border states was completed between Nov. 8 to Nov. 14, 2022. No margin of error can be associated with a non-probability sample.


Conversations are opinions of our readers and are subject to the Code of Conduct. The Star does not endorse these opinions.

Source link



Please enter your comment!
Please enter your name here

- Advertisment -

Most Popular

Recent Comments