Cardinal Point Wealth Management Issues an Alert Regarding the Complexities of Foreign Ownership of Canadian Real Estate
Toronto, ON, United States, 22nd Apr 2025 – Recent legislative changes at the federal, provincial, and municipal levels have introduced new requirements and restrictions that impact how non-Canadians can acquire and manage residential real estate in Canada. As the regulatory environment surrounding Canadian real estate continues to evolve, Cardinal Point Wealth Management is bringing awareness to the increasingly complex landscape faced by foreign investors.
Over the past several years, Canada has implemented a series of measures intended to curb foreign speculation in the real estate market and stabilize housing affordability. These changes include wide-reaching federal statutes, such as the Prohibition on the Purchase of Residential Property by Non-Canadians Act, as well as local taxes and rules targeting property usage and ownership patterns. Together, these policies create a regulatory web that non-Canadian investors must carefully navigate.
One of the most significant developments is the Prohibition on the Purchase of Residential Property by Non-Canadians Act, which came into force on January 1, 2023. Initially set to expire in 2025, this temporary measure has now been extended until January 1, 2027. The Act prohibits most foreign individuals and entities from purchasing residential property in Canada. Its stated goal is to reduce foreign demand for property and ease pressure on domestic housing markets.
The Act defines residential property broadly, encompassing detached and semi-detached homes, rowhouse units, and condominiums. It also casts a wide net in defining “non-Canadians,” which includes foreign nationals, non-permanent residents, and foreign-controlled entities. Violations can result in penalties of up to $10,000 and forced sale of the property. But exceptions do exist for specific groups, including temporary residents with valid study or work permits, protected persons, and individuals purchasing jointly with Canadian spouses or common-law partners.
In tandem with this, the federal Underused Housing Tax Act (UHTA), effective since January 1, 2022, imposes a 1% annual tax on the value of vacant or underused residential properties owned by certain non-resident individuals and entities. This measure aims to deter property hoarding and promote more efficient use of housing inventory. Notably, even those potentially exempt from the tax must comply with strict filing requirements. Failure to file can result in penalties starting at $5,000 for individuals and $10,000 for other ownership types.
Provincially, both Ontario and British Columbia have enacted additional measures to target foreign ownership. Ontario’s Non-Resident Speculation Tax (NRST), currently set at 25%, applies to the purchase of residential property by foreign nationals across the province. Meanwhile, British Columbia levies a 20% NRST and also enforces a Speculation and Vacancy Tax (SVT) of up to 2% annually on certain underutilized properties in designated regions. The SVT requires all residential property owners in affected areas to file declarations annually, regardless of whether tax is owed.
Several major Canadian municipalities, including Toronto, Ottawa, and Vancouver, have introduced Vacancy Taxes to address localized housing supply challenges. These municipal-level taxes, typically set at 1–3% of a property’s assessed value, are designed to discourage property owners from leaving units unoccupied. Annual declarations and supporting documentation are required to avoid fines or misclassification.
Further complicating the landscape are the Anti-Flipping Rules, enacted federally in 2023. These provisions target short-term property sales by taxing gains from the disposition of homes as business income if the property is owned for less than 12 months. That disqualifies such transactions from special capital gains tax treatment or the Principal Residence Exemption. While there are still some—for events such as death, illness, or relocation—the rule is a further deterrent to speculative investment.
While the legislative changes aim to stabilize housing affordability and prioritize local ownership, their effectiveness remains a topic of ongoing debate among economists and housing market analysts.
To address concerns about fairness and practicality, the Prohibition on the Purchase of Residential Property by Non-Canadians Act includes several notable exemptions. These exemptions are designed to balance the Act’s objectives with considerations for individuals who have legitimate reasons for purchasing property in Canada. For example:
Temporary Residents: Individuals holding valid study or work permits may be exempt from the prohibition if they meet specific conditions, such as having filed Canadian tax returns for several years or residing in Canada for a minimum period.
Protected Persons: Refugees and other individuals granted protected status under Canadian immigration law are not subject to the restrictions.
Joint Purchases with Canadian Citizens or Permanent Residents: Foreign nationals can co-own property with their Canadian spouse or common-law partner without violating the Act.
Certain Types of Properties: The Act does not apply to purchases of recreational properties such as cottages, cabins, or vacation homes located outside urban centers. Similarly, vacant land zoned for residential use may also be exempt under certain circumstances.
These exemptions aim to ensure that individuals with genuine ties to Canada or specific property needs are not unfairly penalized by the legislation. However, navigating these exceptions requires careful interpretation of the law, underscoring the importance of professional advice.
Navigating this multi-layered regulatory environment requires a careful and informed approach. Each level of government has introduced rules designed to prioritize affordability and local availability, making it imperative for foreign buyers to understand how these measures interact and overlap. Legal and financial missteps can result in significant monetary and legal consequences, so foreign owners of Canadian property are strongly advised to seek qualified and experienced cross-border tax, real estate, and financial planning guidance.
About Cardinal Point Wealth Management
Cardinal Point Wealth Management is a cross-border wealth management firm specializing in integrated financial planning, investment management, and tax solutions for clients in Canada and the United States. With expertise in cross-border tax planning issues and a commitment to client-centered planning, Cardinal Point offers personalized guidance that accounts for the complexities of international financial regulation. The firm is committed to helping clients make informed decisions that align with both their personal goals and compliance requirements.
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Company Name: Cardinal Point Wealth Management, ULC
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Website: www.cardinalpointwealth.com
Media Contact
Organization: Cardinal Point Wealth Management, ULC
Contact Person: Kris Rossignoli, Senior Private Wealth Manager
Website: http://www.cardinalpointwealth.com/
Email: Send Email
Country: United States
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