The Canadian government has finally promised to ban foreign buyers from dumping their money into Canadian real estate.

The ban on most foreign investment in Canadian housing is expected to come into effect within two years and may let those looking to purchase their first home breathe a sigh of relief.

Over the last two years, house prices in Canada have soared, rising by 50 per cent to $869,300 on average due to several inflationary factors. These factors include foreign buyers purchasing houses and thus reducing the overall supply, overbearing regulations that make building difficult, and the conversion of homes into rental properties — which is also often undertaken by foreign buyers, usually from China, who have no intention of living in the homes they buy.

While a pause on foreign buyers in the Canadian real estate market is perhaps warranted, some are less than optimistic about its effect on home prices.

“I don’t think prices are going to fall as a result, though I do think it takes away at least some of the competition in what is the most competitive market in Canadian housing history,” said Simeon Papailias, who founded REC Canada, a real estate investment firm.

“I don’t think a two-year band-aid is going to have an impact on what’s a fundamental lack of supply.”

To this end, the government is also introducing a $10 billion housing-investment plan to address the lack of supply. 

This plan includes $4 billion towards incentivizing municipalities to ramp up home-building such that 100,000 new homes are developed inside the next five years; 1.5 billion dollars for a Rapid Housing Initiative; and another 1.5 billion towards co-operative housing renewals and construction.

Furthermore, a tax-free First Home Savings Account has been proposed to help first-time buyers save up to $8,000 per year.

Home-buyers will also be entitled to a “bill of rights” to eliminate blind bidding. As is currently the case, the buyer is often liable to wildly overshoot the asking price, especially given that the listing prices have become practically meaningless.

Finally, property flippers are expected to receive harsher taxes, and investments will be made to deter large corporations from buying up vast quantities of real estate.

According to a 2020 study, the average age for first-time buyers is now 36-years-old, meaning that many in their thirties are still living with their parents — something which would have been almost unheard of even twenty years ago.