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Canada to announce ban on foreign purchases of residential real estate for two years – report

The air is blowing out of the Canadian housing bubble.

CTV reports that tomorrow’s Canadian federal budget will include a provision prohibiting foreigners from buying Canadian housing for two years. It will apply to condos, apartments and individual residential units.

The timing is a classic case of closing the barn door after the horses leave. The latest Toronto housing data showed a rapid cooling in the market in March as interest rates rose.

I was on BNNBloomberg last month saying that we are finally at the point when the Canadian housing bubble was about to burst and that certainly adds to my conviction.

The question now is whether it will be a soft landing or a hard landing. These federal government measures are combined with provincial measures and BOC hikes to create a perfect storm in a market that was already out of whack.

Even with this further drop, prices in Toronto are up 18% year over year and the median price for a single-detached home is $1.6 million.

As for the broader picture of the Canadian budget, it will be complicated, but with windfall taxes looming for Canadian banks and measures like this, the risks to the Canadian dollar are negative.

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