Purchasing a home in Canada has become increasingly difficult with changing mortgage rules, the tightening of the stress test, and the impact of inflation over the last few years. In months past we have seen incredible competition for homes and bidding wars were commonplace which drove prices up. However, with all the changes made to mortgage interest rates amongst other things we’ve seen the market shift from a sellers’ market back to a buyers’ market. In addition, now that the international home-buying restrictions have been put into place we should gain a little more breathing room creating more opportunities for Canadians to buy homes.

So, What are the international home-buying restrictions in Ontario?

International home-buying restrictions are measures put in place by the government to limit or regulate the purchase of real estate by a non-resident or foreign buyers. These restrictions can take various forms, such as additional taxes or fees, or limits on the number of properties that can be purchased by a foreign individual or entity.

In Ontario, the non-resident speculation tax (NRST) is a 15% tax applied to the purchase or acquisition of residential property located in the Greater Golden Horseshoe region by individuals who are not citizens or permanent residents of Canada or by foreign corporations or trusts. The Greater Golden Horseshoe region includes the cities of Toronto, Hamilton, and Niagara, as well as several other municipalities in the surrounding area.

More recently though they have implemented The Prohibition on the Purchase of Residential Property by Non-Canadians Act as of January 1, 2023. With this act in effect, Non-Canadians are prohibited from buying directly or indirectly any residential property until December 31, 2024.

Why was The Prohibition on the Purchase of Residential Property by Non-Canadians Act created?

The Prohibition on the Purchase of Residential Property by the Non-Canadians Act (also known as the Foreign Buyers Tax) was created in order to help curb rising housing prices in Canada and make it easier for Canadian citizens and permanent residents to purchase homes. The goal of the act is to make housing more affordable for local residents and to address concerns about foreign investors driving up housing prices.

Why is there a tax on international investors buying homes in Canada?

The NRST is intended to cool the housing market and make homes more affordable for local buyers by deterring non-resident speculators from buying property in the region. The tax applies to both new and resale homes and applies to the purchase price or fair market value of the property, whichever is higher. Exemptions are available for certain groups such as refugees and some others.

The NRST is one of several measures being taken by the Ontario government to address affordability issues in the housing market. It’s important to note that the NRST is not a permanent measure and it is subject to review and changes over time, depending on the market conditions.

Additionally, there are other restrictions such as the mortgage stress test, which is a policy implemented by the Office of the Superintendent of Financial Institutions (OSFI) in Canada, which requires all borrowers to qualify for a mortgage at a higher interest rate than the one they will actually pay. This is intended to ensure that borrowers will be able to afford their mortgage payments even if interest rates rise in the future.

It’s also worth mentioning that in Ontario, foreign buyers are not limited in the number of properties they can purchase if they are willing to pay the NRST.

What does the non-resident speculation tax (NRST) mean for new home buyers?

While it is difficult to say exactly how much these restrictions have helped Canadians buy homes, they are one of the measures being taken to help address affordability issues in the housing market. This additional cost may make it more difficult for non-resident buyers to purchase property in the region, which could potentially increase competition for available properties among local buyers.

With less competition from foreign investors, NOW is the perfect time to buy a home!

Whether it’s a buyers’ or sellers’ market, the real estate market fluctuates and can be a competitive area to step into. If you’re worried about being out-bidded when looking at your dream home, consider buying a home in a buyer’s market — aka right now in the winter months. You will have more time to negotiate conditions and will have less competition from other home buyers compared to the spring months. Plus sellers in the winter months usually have a good reason for selling which works to your advantage as well.

The best thing to do? Get pre-approved for a mortgage regardless if you’re an international or local buyer

It’s important to consult with a real estate lawyer, mortgage broker, and possibly a financial advisor to get the most accurate and up-to-date information about the restrictions that apply to your specific situation.

Getting pre-approved for a mortgage by a professional mortgage broker, like myself, can give you a clearer picture of what you can afford.

• It helps you understand your budget: By getting pre-approved, you’ll know how much you can afford to spend on a home, which can help you narrow down your search and avoid looking at properties that are out of your price range.
• It makes you a more attractive buyer: When you’re pre-approved, you can show sellers that you’re a serious and qualified buyer, which can make your offer more attractive than those from buyers who haven’t been pre-approved.
• It can make the closing process smoother: Once you find a home you want to buy, the closing process will be smoother and quicker since the lender has already pre-approved you for a mortgage.
• It can help you lock in a lower interest rate: Once you have a pre-approval, you can lock in a lower interest rate for a certain period of time, which can save you money over the life of the loan.
• It can help you identify potential issues: The pre-approval process requires you to provide documentation of your income, assets, and credit history. This process can help you identify any potential issues that may need to be addressed before you apply for a loan.

So what are you waiting for? Give me a call at 705-315-0516 or sign up for a free consultation with me today so we can get you pre-approved for the lowest mortgage rate possible!