I'm sure you've heard of the Foreign Buyer Ban, but given the rollout of it, there hasn't been a lot of light shed by the Canadian Government.  What is it?  Who does it impact?  Where does it apply? When will it take effect and for how long? And WHY?  Well read on, as today I am attempting to address just that.  I add my own comments at the end, and fair warning, while I try to not get political on our Website or blog - I did go a little political this time. I apologize in advance for the stronger opinions shared!

In recent years, the Canadian housing market has been experiencing a significant influx of foreign buyers, particularly in major cities. This has led to concerns about the affordability of housing for Canadian residents, as well as potential negative impacts on the overall economy. In response to these concerns, the Canadian government has implemented a foreign buyer ban.  But what does this really mean?

The Foreign Buyer Ban went into effect January 1^st, 2023.  And here is what you really need to know:

• The Why: We are experiencing a housing crisis in Canada.  Projections for the necessary amount of homes to be built by 2030 is 3.5 million in order to achieve housing affordability for everyone living in Canada.  However, CMHC reports that we are going to be about 1.2 million units short given current rates of construction.  Article can be viewed here: https://www.cmhc-schl.gc.ca/en/blog/2022/canadas-housing-supply-shortage-restoring-affordability-2030
• The Who: Who is impacted, you ask? Anybody deemed a non-Canadian.  So if you are a Canadian citizen, a permanent resident of Canada or a person registered under the Indian Act, do not fret.  You can continue on business as usual.  However, if you are considered a foreign citizen, OR are a foreign corporation, then this will apply to you.  BUT, there are exemptions
• If you are a non-resident but married to a Canadian Citizen, you are exempt
• If you are a refugee or someone with temporary resident status (some terms and conditions may apply)
• You have worked in Canada for a substantial period of time and filed tax returns in Canada for three out of the four years prior to purchasing
• An international student with similar stipulations to the above but you have to have spent most of the last five years in Canada.  At which point you can buy a property up to $500,000.
• Some members of international organizations or diplomats living in Canada.
• There are actually more situational exceptions too, but these need to be evaluated on a case-by-case basis.
• The Where: Is not necessarily as clear.  For instance, much of this ban is targeted for properties around metropolitan areas.  In Manitoba, that means Winnipeg, Brandon, Portage La Prairie, Steinbach, Winkler and Thompson. Be careful though with what is defined by the act as a Metropolitan area.  For Example, the Winnipeg Metropolitan area is considered to be as far north as Grand Marais, as far East as Nourse, as far South as Ste Agathe, and as far West as Poplar Point. Source: https://www150.statcan.gc.ca/g1/datatomap/index.html?action=wf_identify&value=%7b%27layers%27:%5b%7b%27values%27:%5b%272021S0503602%27%5d,%27id%27:%27S0503%27%7d%5d%7d
• The When: Thus far, it is only supposed to be a two-year policy. 
• The What: it impacts a variety of real estate options including detached or attached houses, condominiums, or really any real property.  HOWEVER, it does not impact the purchase of homes with 4 dwelling units or more.

The Government has enforced some strict policies to prevent those looking for ways to skirt the laws.  Any Foreign Buyer caught to purchase a home during this period would be forced to sell the property.  Also, any profits from the sale go back to the Federal Government. Any Realtor, lawyer, or mortgage broker that assisted in brokering the transaction would be fined $10,000.  What this means for our clients?  We are having all Buyers in the next two years fill out one additional form, confirming they are not Foreign Buyers.  Otherwise though, it is business as usual.

My concerns about the policy, you ask? I think that these policies are short-sighted, and while they might alleviate some market pressures today, we are just kicking the can further down the road.  The ban really only addresses the symptoms of a problem but not the underlying root cause – which is and always will be a lack of supply and affordable housing options. There are additional side effects to policies such as this:

• Much of the purchasers in Manitoba in new construction areas are newcomers to Canada.  We have effectively removed incentives for many builders to continue to want to develop homes. The resulting negative from this is a decrease in new housing starts which has a negative impact on GDP.
• It will become more difficult for businesses to attract and retain employees.  The Canadian Dream does not include renting, in my opinion.
• It does not address underlying issues.
• Decreases in foreign investment and economic growth as a result of decreased investment in Canada.
• An even bigger “bubble” in the market, two years out from now when the backlog of the Foreign Buyers wishing to get a foothold in the Canadian Real Estate Market, look to buy their piece of the pie.

There are opportunities to be had from this.  Unfortunately, some of those are on the backs of those that have been disadvantaged from the policies.  We have already seen rents increase in Winnipeg, this year. I would anticipate this trend continuing.  People moving to Canada will still need nice, affordable places to move and these programs will put further strain on that rental market.  I also think that there will be Foreign Buyers that look for more creative ways to own real estate here.  Perhaps buying a four-plex (exempt category) with a goal of living in one unit and renting the remaining out.  Where there is a will, there is always a way!

In my opinion, the Canadian Government wants something that fits nicely on a banner and can be accomplished within four years or less, given election cycles.  The ban is going to end right when elections are upcoming, it was put out without much notice in December, right before Christmas. 

Not a lot of thought appeared to go into it. I am not going to lie.  I don’t have the right answer as to what the proper solution is – there truly is no silver bullet.  However, if the underlying issue is that of supply and demand, I think there are policies that the Canadian Government should enact to encourage those to increase supply. Perhaps incentives to builders that are developing more affordable housing.  What we really need, is more supply after all!  Also, the painfully slow/rigorous process to get houses built is another hangup.  We are often told of delays at permitting, infrastructure applications, etc.  I do still think that it is important to have proper inspections – I don’t want homes being slapped up that are dangerous to live within.  But what about next-day inspections instead of weeks or months out?  We could save months upon months for the build process in Manitoba alone! Part of the problem is ultimately that the policies such as this take longer to enact and enforce.  It is not the quick fix that politicians may be looking for.  This appears to be more political theatre than assessing the core issues.   

Read about the Act here: https://laws-lois.justice.gc.ca/eng/acts/P-25.2/page-1.html

Other Articles: https://realestatemagazine.ca/canada-will-have-1-45m-new-homebuyers-by-2025-where-will-they-live/

If you prefer to digest this in a video format, here is the YouTube video I shot covering this topic:

UPDATE:

This article was written before parts of the ban were repealled, so some of my concerns have now been addressed.  However, plenty still remain.  For information on what has changed, here is where you can read more: https://news2me.crea.ca/2023/march-2023/budget-2023/

While I will say this amendment is appreciated, it still feels like a whole lot of political theatre!

#AgentJen

Jennifer Queen

Phone: (204) 797-7945
Email: Jennifer@JenniferQueen.com

Possession days. Being a Realtor we see a LOT of possession days with our clients whether that be on the Buying side or the Selling side.  While possession days can be an amazing celebration, they can also be a cause for concern in some cases. Sellers are supposed to leave the home in the same condition it was when the purchasers viewed the property but that isn’t always the case.

Best case scenario you get the keys to your new home, your keys work to get into the home and when you test all the appliances and mechanical parts of the home they are in the condition you saw them when you viewed the home and made your offer. Awesome!

However, this isn’t always the case and some clients are more sensitive to these issues than others. A home is a used commodity. Even new construction homes rarely are perfect on move-in day and usually have a period of repairs for which the Builder attends the home and does touch-ups.  But that isn’t the case for a re-sale home. Sure everything is meant to be in the same condition as when you offered but what if it isn’t? For example, Sellers are required to give access to the home on possession date, that does not necessarily mean that they have to provide you with keys to the home. It could be an access code for a keypad or it could be a garage door remote. We have even had clients in the past where the access given was a window left open a crack, true story. Now, I wouldn’t consider any of those options to be great ones and we have paid many times for locksmiths for clients who couldn’t get into their house on possession because the keys or code didn’t work, or were altogether missing.

But why am I mentioning these situations?  Well mostly because possession days can be challenging. As much excitement as there, is you have to remember that this is likely one of the largest purchases most will make in their lives. So, taking stock of the home and functioning systems is an important part of that possession day routine.

With home sales the important term is caveat emptor, which is Latin for “buyer beware”. This places the burden on buyers to reasonably examine an item for sale (in this case a home), also known as due diligence, and take these factors into consideration prior to submitting any offer to purchase. Now let’s say all you have properly examined the property (whether be it your trained or careful eye or via inspection) and you have done all your due diligence.  Your offer was accepted and now it is your possession day! You pull up to your new house, you move in and you start living your life. Now a week goes by and all of a sudden there is a clogged toilet, or a tap starts to leak, who is responsible for that? The Sellers? The Buyers? If you go by case law, it is most likely the Buyer’s issue. An offer to purchase, unless specifically listed in as-is condition, typically requires the home and chattels to be in the same condition they were in, at the time of submitting an offer. Many agents will also add in a line item that specifically asks for mechanicals, plumbing, electrical etc. to be working on possession and sometimes even past possession. This can be referred to as a promise that would survive closing.  Most real estate lawyers will try to eliminate a promise like this or ask that it be shortened to just the day of possession. The reason being, Sellers do not want to be responsible for a warranty once they no longer own or have access to the property. Sure, the lights should work when you flip the switch and the water should run down the drain but like anything else all parts of a home need to be maintained and can break down over time.

The real trouble comes when you do check EVERYTHING on possession day and items might not be working as expected. We have seen it all - clients moving in and appliances were swapped, or inclusions on the contract were removed from the property. Seriously, it is unfortunate but these things do happen. We try to the best of our ability to represent the home and the clients and ensure the transaction goes smoothly. But there is a human element to every move – and definite room for error as result.

Here are some tips to help protect you on possession day.

Sellers:

• Take meter readings (photos with time stamps are ideal)
• Take video of sinks/tubs/toilets/fixtures draining and running with no leaks. We often fill the sink or tub to “force” a load of water, just to show it is operating properly.
• Take video of lights working
• Take video of the appliances working. If they are staying with the home, that is.
• Check your keys! If you have multiple keys for the property, kindly give one to your lawyer (so that the Buyers can walk through that front door on possession).  Leave the rest on the kitchen counter.

Buyers:

• Check all appliances included with the sale
• Run the cycles on everything (dishwasher, dryer, washer, stove). It is important to test and notify of anything not functioning properly, right away.
• Take meter readings (photos with time stamps are ideal)
• Test the furnace and A/C (weather permitting for this one.  Don’t try to run it in the dead of winter!)
• Also test fireplaces, hot tubs, jacuzzi tubs, etc. If there is a motor in it, you should likely test it.

If everything is working, then great!! Order a pizza and pat yourself on the back for moving all of your heavy furniture into your home.

If something isn’t working or you can’t figure out how to operate something, reach out to your realtor. It is not uncommon for your Realtor to reach out to the Realtor for the other party and get some answers on how to operate different items within the home.  If it is something that requires servicing from a tradesperson, then it would be a good time to get someone to your home. Who is responsible should really take a backseat to having something working, especially if it is something like a furnace not firing in -30°C in January. Sometimes it is easy and parties are willing to work it out between themselves. Sometimes it is not, and your only real recourse in those situations is to try and recoup your money from them in small claims court, which no one wants to do. But putting people on notice to issues is incredibly time sensitive.  As a Buyer, if you find an issue, the further you are away from possession, the less chance you have of proving it was a Seller issue.

At the end of the day, our best possession days are those when everyone is happy and they find the home just as they had expected it. We will do everything in our power to assist you in the process no matter what situation arises, we know who you will need to call and always have a list of good service providers in almost any industry on hand.  So always be sure to reach out to your Realtor – no matter how big or small you think the issue may be.

Here’s to plenty more happy possession days in 2023!!

#AgentLogan

Logan Queen

Tel: (204) 226-1261
Email: Logan@JenniferQueen.com