Realtor Manraj Dosanjh says potential buyers who don’t have permanent residency yet are eager to join the market but frustrated by restrictions on foreign ownership.Paige Taylor White/The Globe and Mail
Vancouver realtor Marty Pospischil has been getting the calls for a few months now. Americans looking to flee the current chaos phone to talk about buying a new base in Vancouver, a home to live in while they go through the immigration process.
And he has to tell them: ‘So sorry, but you’re not allowed to buy anything here because Canada has a ban on foreign investors in all of the country’s major cities.’
He feels bad for them.
“Every couple of weeks, I get a call from one of them. People are wanting safety and security. And I have to go through everything,” he said ruefully.
Mr. Pospichil is one among many in the real-estate-connected cohort in B.C. that would dearly like to see the federal government remove that ban – put in place in 2023 and currently not scheduled to expire until 2027 – as one way of pulling the current market out of its slump.
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That slump has resulted in dozens of postponed for-sale and rental projects throughout the Lower Mainland in B.C., not to mention the rest of Canada. Presale buyers have backed away from investments that seem like they might turn into financial losses when buildings are finished in three or four years. Rental developers are finding that the decline in gettable rental rates is also making their projects unviable financially.
A couple of months ago, a group of Vancouver developers set off a small dust storm of media attention by putting out a public letter asking for the federal ban to be reconsidered and for provincial foreign-buyer-focused taxes to be reconsidered.
That spiked an unequivocal “NO” from politicians at all levels, who have found that policies limiting or banning foreign buyers are unusually popular with the general public, even though a raft of economists and think tanks say foreign investors are a minuscule part of the market.
The developer’s plea also sparked an off-kilter conversation among public commenters, who mocked builders for having said years ago that foreign investors were not a significant factor in housing prices and are now saying they are desperately needed to help finance future housing projects.
But no one in the industry says changing foreign-investor policies is the single magic solution.
“The foreign buyer ban is a small component of a very complex issue,” said Kevin Layden, CEO of the large Vancouver development company Wesbild. “And we don’t want to open the floodgates again. That’s not going to solve the problem.”
Almost all are saying it’s one small factor that could help tip the market back into some kind of balance and actually encourage more locals back into the market if they think there’s a bigger pool of potential buyers. (Reducing time delays, municipal fees, construction costs, labour costs, financing costs, taxes, and new building-code requirements are also needed, they emphasize repeatedly.)
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The question, though, is whether foreign investors want to come back to Canada and its housing market.
After all, the biggest reason why current projects are in trouble is that domestic investors, who have always been the biggest part of the buyer pie in Canada, are hesitant.
They’re worried about buying a presale condo at a fixed price and then seeing that decline in value by the time they decide to either carry through with the sale or flip it. That could mean a huge loss.
Those who were planning to rent out the unit, which is what the vast majority of investors do, are only hearing about declining rents in the wake of a cap on international students, along with rising maintenance costs, taxes, and insurance, along with continued low provincial limits on rent increases.
Investors of all kinds, foreign and local, used to account for 40 per cent of new-condo sales among the city’s major developers. Now that’s down to 10 to 15 per cent.
Foreign investment in all Canadian real estate has been relatively low, even in recent years, estimated at two to six per cent overall nationally. A Canadian Real Estate Association survey in 2023 indicated that, of all sales considered to be to foreign investors, almost two-thirds go to people who are residents in Canada but aren’t legal immigrants. The other 35 per cent is truly non-resident investors buying vacation homes and the like.
Those averages gloss over spikes that appear in certain preferred neighbourhoods at certain times.
In the Vancouver suburb of Richmond, which became a popular landing place for first Hong Kong and then mainland Chinese immigrants from the 1990s until the pandemic start of 2020, non-resident investors were recorded as being close to eight per cent of new buyers in 2018 to 2020. Vancouver had a similar rate and West Vancouver was close by.
But whether Canadian real estate has the same allure as it did, given all the concerns that domestic investors have, is the question.
Those in the business say there are still potential buyers who aren’t so concerned with a quick-flip profit.
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“There’s definitely interest out there,” said Jack Yong, a lawyer with the Vancouver firm Lawson Lundell who specializes in real-estate purchases by offshore buyers. “They are asking either in advance of getting permanent residency or they have a child going to school here.” Another small, but important-to-developers question, is whether there still exist extremely wealthy buyers who would be happy to pay $20-million for a penthouse used as a vacation option. Those buyers used to be seen as the delicious cream topper for any major downtown project, bringing in enough revenue to cover the slim returns on some other units.
There are a few exemptions for foreign investors, but they are complicated and rare, said Mr. Yong.
Investors from outside Canada are still allowed to buy multi-unit rental buildings, although the barrier of a 20-per-cent foreign-buyers tax makes that idea financially daunting. Even people who have work permits and are planning to apply for permanent residency are currently banned from buying.
Mr. Yong said some of the foreign demand from China has declined because that country keeps getting stricter all the time about taking money out of the country.
Realtor Manraj Dosanjh says demand among foreign buyers is still hot.Paige Taylor White/The Globe and Mail
But Mr. Yong, like many others, pointed out that there are buyers from several countries who are interested in investing in Canada, not just Chinese who were the primary focus of the various bans and taxes brought in over the past decade. Vancouver has typically attracted a lot of Americans (increasingly the largest group of non-resident buyers), South Koreans, Taiwanese, Iranians, and, in particular, South Asians – the province’s largest immigrant group the last several years.
In communities south of the Fraser, which has typically been a gold mine for developers selling to South Asian investors or about-to-be-immigrants, there are still many anxious to buy, says realtor Manraj Dosanjh.
“They’ll buy a piece of property within weeks of making their PR [permanent residency],” he said.
There has been a move among some realtors selling in that area to negotiate with developers to allow foreign buyers to put down a deposit to buy a presale condo provisionally, with the developer agreeing not to pursue the sale if the client’s permanent-residency approval doesn’t come through by the time the building is completed.
Mr. Dosanjh said many potential buyers are frustrated because they feel like now is an ideal time to buy, as developers are frantically lowering prices in order to clear out inventory during the current slowdown.
“They’re in a clear buyers’ market, but they’re frozen out.”