Canada Eyes 2027 Easing of Foreign Investment Curbs to Boost Housing Supply

Canada is reviewing its stance on foreign investment in the housing market, with the possibility of easing restrictions as early as 2027. Housing Minister Gregor Robertson confirmed the existing ban on foreign buyers will remain in place through 2026 but hinted at potential changes in the following year. The government will study how other countries, particularly Australia, have managed to balance foreign capital with domestic housing needs.

The review comes as Canada faces ongoing challenges in providing affordable housing. Developers have criticized the current ban for limiting access to much-needed capital for new construction. Robertson emphasized the need to explore how offshore capital could help increase housing supply without displacing local residents.

Australia has allowed foreign buyers to invest in new residential developments and vacant land, which has contributed to rising housing starts despite difficulties meeting overall homebuilding goals. Canadian officials aim to learn from these experiences while ensuring housing is prioritized for domestic residents.

Lessons from Other Markets

Canada's current foreign buyer ban was introduced in 2023 amid surging home prices driven by historically low interest rates. The government later adjusted the law to allow foreign investment in vacant land development, but developers continue to push for broader access. Australia's approach has permitted foreign buyers to purchase newly constructed homes, helping to boost supply while limiting pressure on the resale market.

Robertson noted that while foreign investment can bring capital and innovation, it must be managed carefully to avoid exacerbating affordability issues. The government will review data and market trends over the next year before making any final decisions on policy changes. Australia's experience shows that foreign buyers can contribute to growth without necessarily inflating prices if regulations are well designed.

Market Reactions and Policy Challenges

The potential easing of foreign buyer restrictions has drawn mixed reactions from industry stakeholders. Ana Bailao, head of Build Canada Homes, has advocated for tax changes to attract foreign capital, but officials say it is too early to finalize any proposals. Developers argue that foreign investment could help fund new projects, especially in underserved areas.

At the same time, concerns remain about the potential impact on local affordability. During the pandemic, home prices surged as interest rates hit record lows, but the market has since softened as the Bank of Canada raised rates. Officials are cautious about any move that could undermine the recent cooling in prices or lead to a resurgence in speculative activity.

Future Pathways and Uncertainties

The government has not yet outlined a specific timeline for its decision beyond the 2027 target. Robertson said the final policy would depend on how the housing market evolves over the next year, including supply and demand dynamics, interest rates, and demographic trends. Canada's housing crisis requires a multifaceted approach, and foreign capital may play a role in addressing key gaps in the system.

While the country's housing market is not heavily reliant on foreign buyers-foreign ownership of properties in major cities was less than 5% in 2020-the government is exploring all potential tools to boost housing supply. The debate reflects a broader tension between attracting capital and preserving affordability for Canadian residents. How this balance will be struck remains uncertain, but the coming year will be critical in shaping the final policy direction.