Trudeau is considering banning foreign buyers – could this be happening here?
The supply of homes is so low in most of the United States that many home buyers, frustrated at losing their offer on a home, in many cases simply abandon the home buying process. And if bidding wars are not the reason to throw in the towel, rising prices make housing unaffordable, especially for many first-time buyers.
Canadian buyers are going through a similar scenario and Prime Minister Justin Trudeau has a plan. But will it work?
The Trudeau Plan
To help alleviate the problem of domestic buyers being excluded from the Canadian housing market, Prime Minister Trudeau of the Liberal Party, as part of his re-election campaign platform, has pledged to temporarily ban two n foreign homebuyers, hoping that this measure will lower home prices by eliminating some of the competition for homes in Canada.
It is particularly infuriating for Canadian citizens (as it would be for citizens of any country) to lose the purchase of a home to a foreign investor who does not even intend to live in the country. House. Says Trudeau: “No more foreign wealth parked in houses where people should be living.”
Trudeau’s opponent, Erin O’Toole of the Conservative Party, would also put a two-year ban on foreign investors, if elected. The third major political party in Canada, the New Democratic Party, would not ban foreign investment in Canada, but propose a 20% tax on foreign buyers.
The Housing Situation in Canada
Vancouver and Toronto are two of the most expensive cities in the world to buy a home, making it particularly difficult for low- and middle-income Canadians to buy a home. In Vancouver, the median price of a home at the end of 2020 was $ 1.1 million and is expected to climb to $ 1.265 million by the end of this year. In July 2021, the median home price in Toronto was just over $ 1 million.
Will banning a foreign buyer work?
The Chinese have been the most active foreign buyers in the Canadian market. The South China Morning Post reports that such a ban will not have much of an effect on lowering house prices and will instead cause foreign investors to rush to buy before any kind of ban is implemented.
And even if an overseas investment ban is implemented, the Canadian Real Estate Association (CREA) says high house prices are due to a lack of housing supply.
Will a foreign buyer ban occur in the United States?
There are no plans to ban foreign investment in the United States. In fact, foreign investment is down in this country anyway, reaching the lowest levels seen in a decade.
As in Canada, the Chinese are the number one foreign buyer of real estate in the United States, but ironically, Canadians come close behind.
Foreign investors tend to drive up house prices in the United States: the median house price in America is $ 305,500, but foreign investors pay around 15% more, so the median price paid by foreign investors is $ 351,800.
The main reason for high home prices in the United States, however, is low supply. Last year broke a record for being the lowest home inventory year on record.
Millionacres net profit
It appears that regardless of which party wins an election in Canada, there will likely be a ban, at least temporarily, on foreign investment. It will be interesting to see if the ban will make a difference in lowering house prices in Canada.
Since rising house prices are a huge problem in Canada, other measures will likely be taken to bring prices down. Ideas on the table include adding more offers, the ability for tenants to turn part of their rent into down payment savings, and the implementation of a tax-free savings plan for tenants. young buyers.
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