Foreign Buyers and Immigration in Canada
In 2016, foreign buyers started to see the value in Canadian Real Estate. They flocked by the dozens to Canada’s major markets, primarily BC and Ontario, scooping up commercial real estate, condos, townhomes and detached properties alike. The promise of increased equity and strong investment opportunity made for a very hot market, and the opportunity still exists in 2017. With that said, the large percentage of foreign buyers had a negative impact on Canadian Real Estate, and foreign buyers in 2017 will be faced with new rules and regulations; the first batch of foreign buyer data in Vancouver, for example, was released on July 7th 2016. It revealed that foreign buyers accounted for a whopping 5 percent of the homes sold in and around the Vancouver area over a small 3-week period leading up to the data’s release. What’s more is that these foreign buyers were spending $400 000 more on average compared to Canadian buyers. In turn, this contributed to the drastically spiked home prices in the area, causing wide-spread concern regarding the markets future stability.
Understandably, the powers that be were forced to make some changes;the market is not what it was in 2016 for potential foreign buyers, although there is still strong opportunity.If you are a foreign buyer looking to purchase in Vancouver, Toronto, or any of the other hot markets Canada can offer, there’s a handful of points you’ll need to be aware of:
Following Vancouver’s initial release of foreign buyer data, BC’s Finance Minister acted by implementing a new buyers tax of 15 percent on foreign buyerslooking to purchase property in the Metro Vancouver area as of August 1st 2016.At the time of implementation, it was unclear how much of an affect this tax would have; most foreign investors were buying higher ticket properties in any case, and clearly had the money. With that said, this tax has drastically slowed down the market; in August and September of 2016, foreign buyers accounted for only 1.3 percent of the total number of home purchases in the area. In contrast, foreign purchasers accounted for a massive 13.2 percent of the regions total in the 7 weeks leading up to the implementation of the tax. So yes, the tax has dissuaded many foreign buyers, and if you are a potential candidate, you’ll need to be prepared to pay this tax.
The 15% tax is not meant to dissuade all foreign buyers, however. Canada is very welcoming of home buyers from all countries, and the opportunity is still strong despite the tax. There are no current restrictions on the type or amount of property you can buy in the country, provided you can pay the tax. Having said that, many foreign buyers seem to have a misconception that owning a property in Canada will somehow aid them with their immigration goals. Owning property in Canada does not give you any immigration privileges, and if you wish to take up residence in the country, you’ll still be required to qualify under Canada's Immigration Laws.Of course, owning property in Canada will not hurt your chances of full citizenship, and may be a nice perk, but it creates no guarantees or promises, and likely won’t have any impact on your chances of entry. If you are considering a home purchase in Canada, it is highly recommended that you seek immediate immigration legal advice to ensure that an effective strategy for potential permanent entry is in place; your realtor is NOT an immigration specialist.
On the topic of down payments: most non-residents are required to pay a much higher down payment compared to their Canadian peers. Non-residents typically must pay a minimum of a 35 percent cash down payment. Of course, you’ll be required by the lenders to verify your income and credit score. You may also be faced with slightly higher interest rates compared to Canadian residents. Despite the higher interest rates, many foreign buyers still find them to be quite attractive.
In addition to the new 15% foreign buyers tax, non-residents are similarly required to pay the same land transfer taxes as Canadian buyers. Legal fees and expenses for purchase are also typically the same for non-residents. Moreover, non-residents will need to familiarize themselves with the CRA'srules and regulations (Canada Revenue Agency), as there are many tax implications for non-residents when selling a property.
As it stands, Canada’s real estate market is still incredibly hot, offering an amazing opportunity for foreign buyers. Canada’s immigration policies are some of the best in the world, but it’s very important to be aware of the costs involved with your purchase, as well as the disconnect between owning property and obtaining your citizenship.
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