Local demand and supply issues overshadow foreign buyer ban, experts say

• The foreign home buyer ban in Canada fails to significantly impact housing prices or inventory levels, according to experts.
• Local demand remains high due to persistent supply shortages, with foreign buyers not being the main drivers of the housing crisis.
• Broader market dynamics, such as zoning laws and construction delays, continue to exacerbate affordability issues.
• The luxury real estate sector stays robust, with high-net-worth individuals and some non-Canadian investors still active in the market.

Unclear outcomes: By most accounts, the foreign home buyer ban hasn't fully achieved its intended impact. What was supposed to be a well-intentioned rule change has done little in the eyes of experts to move the needle on the real issues behind Canada's housing crisis.

According to mortgage agent Corey Bahadur from Mortgage Savvy, the industry had an initial expectation that limiting foreign investments would cool the housing market, particularly in the luxury and high-demand sectors. "What we’ve seen instead is that the demand from local buyers – especially end-users and domestic investors, has remained high, largely due to persistent supply shortages," Bahadur says.

Mortgage Savvy is an Ontario-based boutique mortgage brokerage hyper-focused on financially-minded first-time buyers. The company stands to benefit most from a healthy market that incentivizes new homebuyers with reduced competition and an easier-to-enter market.

Deeper issues: But foreign buyers were never the main drivers of the housing crisis. The affordability issue is driven by broader market dynamics like low inventory and a vast delta between supply and demand. "Some regions have experienced only marginal price adjustments since the ban, with prices stabilizing rather than decreasing significantly," according to Bahadur.

• Specifically in the Greater Toronto Area, zoning laws continue to be an obstacle, as large parts of the region are zoned primarily for single-family homes.
• Limited access to multi-family units, such as condos or townhouses comes into direct conflict with a growing population. Pair that with construction delays due to labor shortages, rising material costs, and the complexities of obtaining building permits are further aggravating the problem.
• "Buyers are hesitant, waiting for better conditions, and developers are cautious about launching new projects, especially in the face of uncertain interest rate hikes and economic volatility," says Bahadur

The luxury market: "Despite broader market concerns, the luxury real estate sector remains relatively robust. High-net-worth individuals are less impacted by rising interest rates, and many see luxury properties as a secure investment in uncertain times," Bahadur says. "In fact, with increased economic confidence, there’s been a resurgence in demand for luxury homes, particularly from domestic buyers who are looking for long-term value."

• Despite the ban, Bahadur sees some non-Canadian investors still looking for ways to find upside in the luxury sector. They gain access through corporate entities or via residency pathways that allow them to bypass restrictions. "This keeps the upper end of the market moving steadily, even in the face of broader economic challenges."