February 28, 2023
The federal government has recently introduced the Prohibition on the Purchase of Residential Property by Non-Canadians Act, which bans foreign investors from buying residential buildings in highly populated areas in Canada for the next two years in an effort to help citizens access more housing.
In an interview with Fortune and syndicated to Yahoo!Finance, partner Andy Gibbons said that the vast majority of commercial buildings in downtown Toronto are zoned as mixed-use and would be considered as residential for the purpose of the act.
“Therefore, in fear of being subjected to the penalties, which range from a $10,000 fine to a forced sale, some foreign buyers are putting their transactions on hold,” he said.
While Andy says this was an unintended consequence, the ban is still causing a “chilling effect” on the commercial real estate market.
The development of rental housing has also felt the impacts of the new rules. Although developers can still receive foreign investments, the rules outline that only three per cent of the residential purchase can be sourced from foreign funds.
“When the threshold is at three per cent, it becomes easy to trip that,” Andy told The Globe and Mail in another interview.
“A lot of these developments require land assemblies and that has been caught as well.”
Andy continued, saying he’s noticed that the market is spooked as the industry avoids repercussions of the rules.
“Nobody is able to get comfortable about advice for clients,” he said.
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