Real Estate in Canada is regulated provincially, so this guide is tailored to foreign buyers buying in Toronto, and surrounding areas. The rules around foreigners buying real estate in Canada aren’t related to citizenship, so there’s no restriction on how much property or the type of property you can purchase.

However, it’s important to note that as of January 1, 2023, Canada has placed a 2-year ban on all purchases of Canadian real estate by foreign investors. The ban prohibits foreign buyers from purchasing land, condos, single-family homes, or very small buildings in metropolitan areas of at least 100,000 people. That means some recreational properties, cottages, apartment buildings, and rural vacant land is not covered by the ban (but the single-family properties are subject to a foreign buyers tax).

Contrary to popular belief, the buyers who are purchasing single family homes like condos and homes are mostly students, permanent residents, family of Canadians (like parents, siblings, and cousins), as well as temporary workers. Many of these buyers are required to pay a foreign buyer’s tax, but after meeting strict criteria, they are refunded their tax.

Exceptions To The Ban

As of January, 2023, the exceptions to the foreign buyer’s ban include:

• Canadian citizens and permanent residents
• The spouses of Canadian citizens or permanent residents
• Non-Canadian tenants looking to rent a property
• Temporary residents in Canada on work permits
• Refugees and those making a claim for refugee status
• Accredited members of foreign missions in Canada

The rules of exemptions are more complex than just meeting the criteria. It’s important to discuss your eligibility with a Canadian lawyer and/or accountant prior to entering into an offer to purchase property.

Foreign Buyers‘ Tax In Ontario, Canada

As of October 2022, our Non-Resident Speculation Tax (NRST) was overhalled. We went from taxing homes purchased within the greater golden horseshoe by 15%, to taxing all single family property in Ontario at 25% when purchased by a foreign buyer. There are exceptions to the taxes though: Read more about the foreign buyer’s tax here. 

The tax is only applicable to single-family homes with less than 6 units. Multi-residential property with 7 or more units is not subject to the tax.

Confirm with your lawyer prior to entering any agreement to purchase a property, because the rules around the tax exemption are very complicated. For example, if you purchase a 7+ unit building, but each unit has a separate title, it is treated as 7+ individual trades of properties, and foreign buyer’s tax is levied.

Does Investing In Canada Give Any Special Immigration Privileges?

Owning property in Canada does not give you any special immigration privileges. To see if you qualify to immigrate to Canada, check out the Government Of Canada; Immigration and Citizenship Website. Unless you have a work visa, student visa, or permanent residence, you can only stay in Canada for 6 months or less at a time. Some visitors have “flag poled”, where they stay for 6 months, and then leave for a few days before coming back. This practice constitutes living in Canada, disguised as a visitor, and will eventually get you barred from the country for a period of time.

Non-Residents Collecting Rent In Canada

If you’re a non-resident collecting rent on the property in Canada, your income is subject to a 25% withhold tax on the gross rent received. Your tax obligation can end here, but if you choose, you can file taxes with the CRA and have that amount reduced by your expenses. Claimable expenses include mortgage interest, property taxes, property maintenance, and repairs. To claim income on your rental property as a foreign owner, you must file an NR6 with the CRA. This has to be approved by the CRA.

Is Financing Available For Foreign Buyers In Canada?

Depending in your specific circumstances, you might be eligible for Canadian financing. However, Canadian banks generally only look at Canadian income when qualifying a buyer for a mortgage. There are some mortgage products that look at net-worth, but they would need a large downpayment on the home.

Where Do You Look For Toronto Real Estate?

In Ontario, brokerages and agents pool their listings in what we call the Multiple Listing System (MLS). All houses for sale are pooled into a shared database that all agents and clients can access. If you’re looking to buy a house, you only need to work with one agent to access all listings. If you want to get started, the best website for public viewing is realtor.ca.

Purchasing While Outside The Country

In today’s day and age, it’s easier than ever before to buy a home from overseas. Almost all listings have professional pictures and videos, and most have floorplans and measurements. With Facetime, Skype or WhatsApp, we can also virtually walk our clients through the home.

Although, nothing beats being in the country in-person while purchasing.

To sign documents, we use DocuSign Electronic Signatures, which can be signed in person or from overseas.

To sign the mortgage documents and close on the home, you are required to either be in the country or have a power of attorney. The power of attorney can be done from overseas, but the original documents need to be couriered to a reputable law firm in Toronto.

Once The Offer Is Accepted

It’s common practice to present a non-negotiable cheque payable within 24 hours of an accepted offer. International clients can opt to do a wire transfer into the listing brokerage’s insured trust account. This deposit is refunded if there are deficiencies found in the home inspection, or if you fail to obtain financing as per the clauses written into your contract. As long as the offer included conditions / contingencies for acceptable financing and inspection.

What Does It Cost To Buy Property In Canada?

The closing costs of a home are between 2-4% of the purchase price. There are no additional levies or fees for international buyers, except the foreign buyer’s tax that applies to speculators.

The seller pays both the buyer and seller’s realtor commissions. So hiring an agent to help you make your purchase will likely cost you nothing, but when it comes to selling you need to budget to pay for both the buyer and seller’s agent’s commission.

We like to say at Sotheby’s International Realty, that International is our middle name. Janette and I take that to heart, having lived on three continents and sold real estate on two. If you’re thinking of buying a property in Canada, contact us. We strive to educate our clients on every aspect of the sale, so they make the most informed decision they can.

This blog is written as general information but cannot be relied on as advice. The rules around purchases are changing frequently and it’s up to the reader to verify that the information contained herein on this blog is accurate and up to date.