(CMR) Canadian Prime Minister Justin Trudeau has announced a two-year ban on foreigners buying homes as the country deals with housing affordability issues.
The measure is expected to help the government cool an overheated market after prices climbed by more than 20% last year. The average home in Canada is nearly C$817,000 ($650,000; £495,000), more than nine times household income.
The government has also imposed higher taxes for people who sell their homes within a year.
The foreign buyers' ban will apply to condos, apartments, and single residential units. This new measure will exclude permanent residents, foreign workers, and students. Foreigners who are purchasing their primary residence in Canada will also be exempted.
The country's budget also includes billions for new housing and measures to help Canadians trying to get into the market, including a new savings account and changes to the first-time homebuyers tax credit, AP reported.
Industry analysts said it was not clear a ban on foreign buyers would address the housing problem as foreign buyers account for a small fraction of the market.
Ben Myers, president of advisory firm Bullpenn Research & Consulting in Toronto, who found foreigners accounted for just 1% of purchases in 2020, down from 9% in 2015 and 2016, told BBC he does not think the ban is going to have a huge impact.
“It's a fairly low number and let's face it, the people that really want to buy … are going to find alternative ways to do it,” he said
Mr. Myers said the soaring housing costs reflect strong population growth and a shortage of supply, due in part to rules that restrict development.
According to BBC, the issues had worsened since the pandemic hit in 2020, when policymakers in Canada and elsewhere slashed interest rates to stabilize the economy, lowering borrowing costs and boosting demand even further.
The moves have fuelled the soaring housing prices seen in many markets worldwide, but in Canada, the disconnect between home prices and incomes is one of the most dramatic, according to OECD data.
In addition to the temporary ban on foreign buyers, the budget proposal his government unveiled on Thursday sets aside billions to spur new construction and proposes new programs, such as tax-free savings account for first-time buyers.