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Economy

How much will Canada's block on foreign buyers help its housing crisis?

SACHA PFEIFFER, HOST:

Earlier in the program, we talked about the challenges of buying a house in the United States right now in Canada. There's also a housing crisis. Real estate prices there have become stratospheric. So in its national budget this spring, the Canadian federal government made a proposal to address the problem - a two-year ban on home sales to foreign buyers. But how would prohibiting foreigners from buying houses in Canada affect the Canadian real estate market? We're going to put that question to Rachelle Younglai. She covers real estate for the Globe and Mail in Toronto. Hi, Michelle.

RACHELLE YOUNGLAI: Hi.

PFEIFFER: Rachelle, here in the United States, the housing market is also just bonkers. If you're a seller, you're probably happy. If you're a buyer, you're probably demoralized. Would you give us a sense of what the market is like in Canada, including whether this is just a big-city problem or everywhere?

YOUNGLAI: It's an everywhere problem. It's a national problem. Over the past two years, house prices have gone up by 50%. The typical home price in Canada across the country is over $800,000. It's a huge problem. And that's what we're dealing with right now.

PFEIFFER: So the Canadian prime minister, Justin Trudeau, wants to lock foreign buyers out of the market. But how much of the Canadian housing market is even owned by foreign buyers? And would you expect to see any real impact from that kind of ban?

YOUNGLAI: Well, the latest data shows that foreign owners own a very small share of the housing stock. In Ontario, for example, they own 2.2% of homes. In British Columbia, they own 3.1%. That was data as of 2020. So it's a very, very small share. And we also have an idea that domestic buyers, Canadian buyers, were behind the latest real estate boom, not foreign buyers. So I would say this ban will not have a huge impact on home prices here.

PFEIFFER: Then why would the country propose that ban at all?

YOUNGLAI: I think it's politically convenient since foreigners can't vote here. They're an easy scapegoat. And that's, I mean, I think one of the main reasons.

PFEIFFER: Rachelle, here in the U.S., people depressed by American politics sometimes joke or maybe not always joke - maybe they're serious - that they want to move to Canada. If these people hear about this proposed ban, they might think that their window of opportunity is closing. But this proposal has a lot of loopholes. So is it not as draconian as it sounds?

YOUNGLAI: Oh, yeah, for sure. I mean, there are lots of exemptions. So, for example, if you are a foreign student and you intend to make Canada your home, you are allowed to buy. If you're a foreign worker with a visa, you can also buy. If you're married to a Canadian, you can buy. And also, it's a two-year ban. So you could always wait. And the other thing is it's not even - it's not a law yet.

PFEIFFER: It's still a proposal.

YOUNGLAI: It's still a proposal. Right.

PFEIFFER: So interesting. I mean, as you're saying, it sounds like it's not as scary sounding as the headline makes it seem. And if banning foreigners from buying homes in Canada is unlikely to free up more houses, are unlikely to bring prices down, and it's more of a domestic problem, then what else does the Canadian government think would help? Because I've read, for example, that there are also proposals to boost construction and help first time homebuyers save for a down payment. Anything else on the table?

YOUNGLAI: Yeah. They have another plan to prevent people from flipping their houses. So they have a proposal to tax you if you sell your house within a year of buying it. So that's that's one plan. You mentioned the boost in construction. One of their plans is to double or to try to increase the pace of construction. It's not really clear whether that will work either, because we, like your country, are facing a labor shortage, especially in trades. So even if cities were on board to increase the pace of construction, there is no one to do the work.

PFEIFFER: And it also sounds like none of these are quick fixes that are going to overnight make the home market, the housing market more accessible. So I have a bigger picture question for you, which is if homeownership is a goal in an ideal for so many people, I mean, here in the U.S., it's central to that concept of the American dream, do Canadians just need to lower their expectations about someday owning a home and think about renting as a good long-term option?

YOUNGLAI: Yeah, for sure. For sure. I mean, it's a huge goal for Canadians, too. Most Canadians don't want to rent. They want to own. And people always talk about how we should look at Europe. People rent and they're fine with renting. But Canadians are not fine with renting. They want to own. So yeah, it is a shift in thinking. We're definitely not there yet.

PFEIFFER: Rachelle Younglai is a reporter with the Globe and Mail. Thank you very much for talking about this.

YOUNGLAI: Thank you. Transcript provided by NPR, Copyright NPR.