The Canadian government has taken significant steps to ease the process of purchasing a home for non-Canadian residents and Canadian citizens. The recent changes will make it easier for non-Canadians to buy residential real estate, and a new savings account will help first-time home buyers. Here is a closer look at the new regulations and what they mean for those purchasing a home in Canada.
Restrictions Reduced For Non-Canadian Homebuyers
On March 27, the Canada Mortgage and Housing Corporation (CMHC) announced that they had amended the Prohibition on the Purchase of Residential Property by the Non-Canadians Act, making it easier for non-Canadians to purchase a property. Under the new regulations, non-Canadians on a work permit can now buy mixed-use residential and commercial land if they meet specific criteria. The residential property could be detached buildings or similar properties, such as semi-detached, rowhouse, residential condominium, and similar real estate. There are also provisions for vacant land, which can now be bought by non-Canadians and used for any purpose the buyer wants, including residential development.
Proof of Tax Filings Is Now Unnecessary
The Canadian government has repealed the current arrangements on tax filings and prior work experience in Canada for temporary residents with a work permit looking to purchase a home. Work and study permit holders no longer need to meet several conditions to be eligible, including working in Canada for at least three of the past four years before making the purchase, filing tax returns for at least three of the past four years before the purchase date, and owning only one residential property.
First Home Savings Account
The new Tax-Free First Home Savings Account (FHSA) is a Canadian government initiative that helps first-time homebuyers make a down payment more efficiently. As of April 1, 2023, Canadian financial institutions will start offering the FHSA, allowing first-time homebuyers to save up to $40,000 for a property purchase completely tax-free. Account holders can contribute a maximum of $8,000 annually, and contributions to the account are tax-deductible. Withdrawals to purchase property for the first time will also be tax-exempt, similar to a tax-free savings account. The Canadian government estimates the FHSA will provide $725 million in first-home purchase support over the next five years.
Housing Prices in Canada
According to the Canadian Real Estate Association (CREA), the average home price in Canada was $662,437 as of February 2023, representing a 19% decrease from the all-time high home prices of February 2022. Home sales increased by 2% from February to March 2023, but newly listed properties have decreased by 8%. Higher interest rates have increased borrowing costs and led to the reduction of real estate prices. Home prices in Alberta and Saskatchewan have been more stable than in other parts. Forecasts suggest that home prices in Canada will decline by about 6% by the end of the year.
The Canadian government has made significant changes to make it easier for non-Canadians to purchase residential real estate and for first-time homebuyers to save for a down payment. The new regulations will remove many homeownership barriers and provide a much-needed boost to the housing market.