Setback for GCC investors as Canada bans foreign investments in residential properties

Canada imposed the ban after the spike in home prices since the pandemic started, CNN Business reported.

Cash rich investors from GCC are among the leading international investors in real estate assets in several Western cities.

The ban is currently announced for two years. Immigrants and permanent residents of Canada, who are not citizens, however, are exempted from the ban.

The Canadian government passed a law to ban foreign investments in properties as home prices in the domestic market surged after the start of the pandemic.

Campaigning by a section of politicians, who believed that overseas investments in properties were leading to supplies and prices, also is said to have influenced the move on the ban.

The desirability of Canadian homes is attracting profiteers, wealthy corporations, and foreign investors, the campaign website of Prime Minister Justin Trudeau’s party had stated in the past year.

“This is leading to a real problem of underused and vacant housing, rampant speculation, and skyrocketing prices. Homes are for people, not investors,” it read.

Interestingly, the ban is imposed even as the steep rise in home prices in 2020 and 2021 was already reversed in 2022.

Average home prices in Canada peaked just above $800,000 Canadian in February and have fallen steadily since then, dropping about 13 percent from that peak, according to the Canadian Real Estate Association.

Canadian Bank is also reportedly responsible for rising prices as they are raising interest rates, resulting in higher mortgage rates in the country.

The real estate association voiced concern about the law, even with the exemptions for people who intend to move to Canada.

In a statement, the group said that Canada has built a reputation as a multicultural nation.

As currently proposed, the prohibition on the purchase of residential property by non-Canadians can impact our reputation as a welcoming nation, the group’s statement said.