Canada’s federal government is considering a significant change to its foreign homebuyer policy, potentially allowing non-Canadians to purchase newly constructed residential properties while maintaining restrictions on the purchase of existing homes.
The proposal, included in Prime Minister Mark Carney’s 2026 federal budget, comes as Canada’s housing market faces slowing sales, particularly in the condominium sector. Developers in major cities are struggling to secure buyers and financing for new projects, raising concerns about the future supply of housing.
Under the proposed approach, the federal government would extend the ban on foreign purchases of existing residential properties until January 1, 2029, while exploring an exemption for newly built homes.
However, the proposal has not yet become law. Important details, including the definition of a newly built home and how the exemption would work, remain to be determined.
Condominium Market Slump Drives Policy Reconsideration
The pressure is particularly evident in Canada’s new condominium market. Sales of newly built apartments have weakened in major urban centres, including Toronto and Vancouver, making it increasingly difficult for developers to launch construction projects.
In Metro Vancouver, the value of completed but unsold condominium units is estimated at approximately $4.4 billion. More than 80 per cent of these units are reportedly priced above $1 million.
Financing has also become a major obstacle. Lenders often require developers to secure pre-sales for approximately 70 per cent of a building’s units before providing construction financing.
When buyers are difficult to find, developers may struggle to meet these requirements, delaying projects and discouraging new investment.
Government Sees Foreign Investment as a Potential Boost
Supporters of the proposed policy argue that allowing foreign buyers to purchase newly constructed homes could bring additional investment into Canada’s housing sector.
They believe this could help developers secure funding, complete projects already under construction and launch new developments. In turn, increased construction activity could contribute to the country’s overall housing supply.
The federal government is considering the proposal as part of broader efforts to encourage housing investment and address the shortage of available homes.
However, high construction costs, financing challenges and weaker property sales continue to create significant difficulties for the industry.
Housing Affordability Remains a Major Concern for Canadians
Despite the potential benefits for developers, the proposal has also raised concerns about whether it would make housing more affordable for ordinary Canadians.
Critics argue that allowing foreign investors to purchase newly built properties could improve sales for developers without necessarily reducing prices for local homebuyers.
If overseas investment mainly supports sales of expensive condominiums, the greatest benefits could go to developers and investors, while middle- and lower-income families may continue to struggle with rising housing costs.
Provincial taxes on foreign buyers would also remain in place. Ontario currently imposes a 25 per cent tax, while British Columbia applies a 20 per cent additional property transfer tax in designated areas.
Mark Carney Government Faces a Difficult Balancing Act
The proposed policy presents the federal government with two major challenges: supporting Canada’s struggling construction industry and ensuring that housing remains accessible and affordable for Canadian residents.
The success of the proposal will depend partly on how the government defines newly constructed properties, whether pre-construction purchases are included and what safeguards are introduced to ensure the benefits of additional investment reach the wider housing market.
If the policy attracts new investment and encourages developers to build more homes, it could help increase Canada’s housing supply.
However, the central question will remain whether these new properties serve the housing needs of Canadian families or primarily become profitable assets for investors.
For the Carney government, the challenge is not simply to attract more money into the housing market, but to ensure that increased investment translates into more homes that Canadians can realistically afford.
