Foreign Buyers

We have talked over the past two weeks about reasons why rental rates are decreasing. Another factor is the restriction on foreign buyers. 

In January 2023 the Federal government elected to put their feet in the water of how they can help reduce or control the fast rising housing prices. The federal government doesn’t control many factors related to housing so they looked at one area they can control and that is who is legally allowed to buy housing in Canada. The federal government chose to implement restrictions on the foreign buyers buying housing in Canada to prevent anyone who is not living in Canada and people who are living here but are not citizens or permanent residents you are prohibited from buying a property in Canada.  

This was the beginning of the slow down in the new development sales construction. New developments are often sold to foreign buyers especially the Vancouver market to help with the building of the large towers. The slow down quickly transitioned to the pre-sales that were completing slowing as the previously built market started to slow down. 

When the sales market starts to slow the rental market also slows. We first started to see an increase in rental inquiries from people who were in Canada and not permanent residents who were now prohibited from buying housing in Canada. That trend slowed down as the housing market started to slow even more and we found the potential tenants who were now looking for a place were just upgrading from where they currently lived. Maybe larger spaces and or closer to work. This was the first sign we were heading back to a “traditional” rental market. 

A traditional rental market is when people are currently renting a place and then find a new place to live before they give notice to vacate where they live. Since January of 2023 the people we have been renting tow are not new to the country, have to give notice and are not in a hurry to move. All of these indicators show a market that has an over supply compared to the demand. When the market has less demand then supply the rental rates decrease. 

The ban on foreign buyers helped contribute to the supply as it removed a segment of buyers the developers or the pre-sale buyers would sell to, the investor. 

A ban on foreign buyers across the country may not be the best policy decision as it affects each region differently. In some areas there are no foreign buyers and it will not affect the market, in larger markets like Vancouver and Toronto where investor demand is higher it has a very negative effect on the housing and rental prices. In fact any federal policy will have different effects in each market place and maybe the housing policies should be more regionalized.  Inthe end the Federal Government wanted to be seen doing something to help reduce the rising housing costs for sles and rental and the foreign buyers ban contributed to this effect in the markets.           

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