Last year was a very rough one for the Canadian real estate market as home prices in Vancouver and Toronto real estate markets were the headlines for all investors. Home prices in these markets became extremely unaffordable for many middle class earning households.
This growing concern led to the Canadian government to introduce a 15% tax on foreign buyers to help cool down the home prices. However this law led foreign buyers feel they were excluded from the housing market.
Furthermore, the government also introduced a tighter mortgage policy which meant that buyers going in for a mortgage will have to go through a stress test to determine if they will be able to repay their loan in an event of any change in their financial status.
This new mortgage new prevented numerous first-time buyers from being able to enter the housing market. In earlier years, the stress test was only carried out on some specific market sectors but presently, to ensure that consumers are capable to repay their loans in an event of financial changes, the stress test is now carried out on all insured mortgages.
This stress test will however be felt mostly by buyers in the Vancouver and Toronto markets as they are already facing high home prices.
In the meantime, foreign buyers also have major challenges to face with the introduction of the new tax. They will no longer be able to go free of tax when making home resale. This is the government’s way to cut down on the influence on foreign buyers on the market price.
A limitation on insurance by the government is also a major concern for foreign buyers and the property bought must be occupied by the buyer for a period of them. But even though these laws by the government are an effort to help bring down home prices, some experts believe that the contribution of foreign buyers aided in economic growth.