Canada, like many countries, has certain limitations in place related to foreign investment and ownership – in everything from large-scale businesses to sports teams. These anti-free market, anti-capitalist measures are bad enough on their own, but Prime Minister Justin Trudeau and the Liberals have found a way to make these restrictions even worse.
The Canadian government announced last week that the existing ban on foreign nationals from purchasing residential property has been extended until 2027. The only exceptions to the rule will be asylum seekers, some international students and temporary workers.
For potential foreigner home buyers, including thousands of British expats, this is terrible news. Which isn’t to say they didn’t expect it. If they know anything about the Great White North, they probably sensed it was coming.
For a long time, house prices were sky-high in major cities like Toronto, Calgary and Vancouver, and strong in many mid-sized and smaller cities and towns. This remained the case during Covid-19, when prices increased by an astonishing 46 per cent between February 2020 and February 2022. You would naturally assume some of the roughly 650,000 British expats in Canada participated and took advantage of this real estate boom.
My family and I have been involved in mortgages and investments for over a century. We’ve witnessed many boom periods in Canadian real estate and, as you may have guessed, an equal number of bust periods. My father and I spent many an hour speculating on when the housing market in the city we live in, Toronto, would ultimately bottom out. The business cycles described by classical economists like Jean Charles Léonard de Sismondi and Robert Owen cannot be ignored or avoided forever.
Eventually that happened in Canada, when the real estate bubble burst. The Canadian Real Estate Association (CREA) had forecasted a decline of 3.3 per cent for national average home prices in 2023, but suggested that it will experience a small rebound of 1.5 per cent in 2024. This wasn’t a full-blown crash, by any means – but the effect was significant enough for the Trudeau Liberals to take notice.
The reasons why this happened were obvious. ‘When prices were going up as much as they were,’ Bank of Montreal senior economist Sal Guatieri told the Daily Telegraph in January last year, ‘there’s an incentive to invest… and as you’re doing that you’re pushing prices higher. It was just a massive asset bubble. It wasn’t just in the housing market. Asset prices exploded higher globally across most categories.’
But the Trudeau Liberals decided to target foreign nationals as the main cause. The government believes restrictions on British expats and others from purchasing second homes, among other things, will prevent housing prices from becoming inflated again – and lead to the market eventually stabilising.
‘By extending the foreign buyer ban, we will ensure houses are used as homes for Canadian families to live in and do not become a speculative financial asset class,’ Finance Minister Chrystia Freeland recently told the media. ‘The government is intent on using all possible tools to make housing more affordable for Canadians across the country.’
Is she right? Absolutely not.
To begin with, the Canadian government’s decision to extend the ban on foreign nationals from purchasing residential property until 2027 is both undemocratic and counterproductive. Restricting individuals and groups from having proper access to a particular market, real estate or otherwise, goes against the very nature of important concepts like free market economics, private enterprise and consumer choice. Countries should always want to have a larger pool of interest from prospective domestic and international clients and buyers, not a smaller pool that clearly favours one group and hamstrings others.
Contrary to occasional yelps of nationalistic jingoism from the peanut gallery, a housing market in a liberal democratic society, like any other market, shouldn’t be the sole domain of permanent residents. If British expats and people living in other countries wish to purchase a home either as a primary residence or purely for financial investment and gain, they should have that right. If the highest bidder is Canadian, British or otherwise, so be it. Restricting who can participate means this housing market isn’t truly open for business.
Ottawa’s decision won’t help Canada’s real estate market, either.
Government intervention will keep housing prices in certain provinces more affordable for Canadians, but it artificially restricts the market and prevents the prices of houses from naturally rising or falling in real-time economic conditions. That’s not beneficial to the Canadian dollar, long-term economic growth and the country’s financial future. Why? When the housing ban is lifted (if it’s ever lifted), many foreign nationals may choose not to purchase homes in this country because they were restricted from the marketplace for no good reason other than their birthright. This could potentially have a devastating effect on other parts of the Canadian economy, including business investments, job opportunities and travel and tourism.
The real answer for the Canadian government is to toss aside this ridiculous housing ban for foreign nationals, remove most or all foreign ownership restrictions and open up the economy to free markets, private enterprise and legitimate competition. Trudeau obviously won’t do this, but maybe Conservative leader Pierre Poilievre will make this long-awaited move forward if he becomes Prime Minister.
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