Why More Countries Are Banning Foreigners From Buying Real Estate
Canada has become the most recent country to impose restrictions on non-residents buying real estate, arguing that wealthy investors from other countries are pricing out would-be local homeowners. But is singling out foreigners the best way to face a troubled housing market?.
It’s easy to forget that soon after the outbreak of COVID-19, many real estate experts were forecasting that housing prices could face a once-in-generation drop. The logic was that a shrinking pandemic economy would combine with people moving out of cities to push costs down in a lasting way.
Ultimately, in most places, the opposite has happened. Home prices in the U.S., Canada, Britain, Germany, Australia and New Zealand rose between 25% and 50% since the outbreak of COVID-19.
This explosion was driven by a number of factors, including low interest rates, supply chain issues in construction and shortages in available properties caused in part by investors buying up large swathes of housing stock.
Yet some see another culprit deserving of particular attention: foreign buyers.
Governments around the world are increasingly intervening in a bid to push down prices by limiting access to buy real estate to only residents. Canada made headlines recently as it introduced a two-year ban on non-resident foreigners from buying homes in the country.
Soaring housing costs in Canada
Non-citizens can still buy property if they live in Canada, as can refugees and some international students. It’s an issue that may shuffle the usual ideological lines, as the “foreigners” being shut out are often wealthy investors having a negative economic impact on struggling locals.
Canada’s liberal Prime Minister Justin Trudeau has argued that placing limits on foreign buyers is not about shutting out individuals: “The desirability of Canadian homes is attracting profiteers, wealthy corporations, and foreign investors,” Trudea’s Liberal Party promised before the last Canadian election. “This is leading to a real problem of underused and vacant housing, rampant speculation, and skyrocketing prices. Homes are for people, not investors.
“The cost of buying a home has exploded in Canada — when Trudeau announced the plan in 2022, prices were up by more than 27% compared to the previous year.
“So many new homes are being looked at as assets, as investments — as opposed to places to raise families and create communities,” Trudeau said at the time.
The Globe and Mail reports that in Vancouver, on the west coast of Canada, many local politicians have called for a ban on non-resident buyers for years, hoping to stem the “flipping” of properties and deflate the city’s overpriced housing market.
For more than a decade, the city has been consistently ranked one of the most unaffordable places to live anywhere in the world. In the 2010s, a tear-down home in the Vancouver area cost at least half a million Canadian dollars — a bargain compared to the average price of $1.9 million for a detached home in 2022.