Lori Meadows
Canada is a popular destination for international students, known for its high-quality education, diverse cities, and excellent living standards. With rising housing costs, the Canadian government introduced the Prohibition on the Purchase of Residential Property by Non-Canadians Act, effective from January 1, 2023, to increase housing affordability for citizens and permanent residents. This law prohibits non-Canadians, including international students, from buying residential property in urban areas for two years, with an extension until January 1, 2027. However, there are exceptions, and international students can legally purchase property with the right criteria, financial plan, and awareness of the challenges and responsibilities of homeownership.
| Characteristics | Values |
|---|---|
| Can international students buy a house in Canada? | Yes, international students can buy property in Canada. |
| Who is this applicable to? | Foreign workers and international students who have lived in Canada for an extended period and are working towards permanent residency. |
| Any exceptions? | Canadian citizens, permanent residents, and temporary residents are exempt from the ban. |
| Any other requirements? | International students must prove that they were in the country for 244 days each year for the past five years before making the purchase. They must also provide proof of filing tax returns in Canada for the same period. |
| Any purchase price restrictions? | The purchase price of the residential property should not exceed $500,000. |
| Any other restrictions? | The residential property should not be in a Census Metropolitan Area (CMA) or Census Agglomeration (CA). |
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What You'll Learn
International students are considered non-Canadians
International students are generally considered non-Canadians and are subject to certain regulations when it comes to purchasing property in Canada. While the country faces a housing crisis, the government has introduced measures to curb rising costs, specifically targeting foreign investors who buy homes without living in them.
The Prohibition on the Purchase of Residential Property by Non-Canadians Act defines residential property as buildings with up to three dwelling units, including detached homes, semi-detached houses, and condominium units. This Act prohibits non-Canadian entities, such as foreign corporations, from purchasing non-recreational residential property in Canada. However, there are exceptions for non-Canadians with Canadian spouses or common-law partners and those who inherit property.
International students who plan to live in Canada long-term and are working towards permanent residency are exempt from the ban. To be eligible to purchase a home, international students must meet specific requirements. They must have spent a significant portion of the previous five years in Canada, which equates to being in the country for 244 days each of those years. Additionally, they must provide proof of filing tax returns in Canada during the same period.
It is important to note that the maximum purchase price for a home is limited to $500,000, which may not be sufficient to buy a home in certain provinces like Ontario or British Columbia, where average house prices exceed this threshold. International students considering purchasing property in Canada should familiarize themselves with local housing markets and understand the eligibility requirements and real estate laws to ensure a smooth transaction.
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New restrictions on foreign property ownership
On January 1, 2023, the Prohibition on the Purchase of Residential Property by Non-Canadians Act, or the foreign home ownership ban, came into effect in Canada. This law prevents non-Canadians and corporations controlled by non-Canadians from purchasing residential property in Canada for two years. The ban was introduced to address the country's housing crisis and reduce the cost of housing, which has escalated in recent years.
The Act defines "non-Canadians" as those who are not citizens, permanent residents, or temporary residents with valid study or work permits. It also includes foreign commercial enterprises and privately-held corporations or entities controlled by non-Canadians, with "control" defined as direct or indirect ownership of shares or interests of at least 3% to 10% of the corporation's value or voting rights.
The ban has several exceptions, including foreign workers and international students who have lived in Canada for extended periods and are working towards permanent residency. Additionally, non-Canadian spouses or common-law partners can purchase property with their Canadian partners, and non-Canadians looking for rental properties are exempt. Accredited members of foreign missions in Canada with valid diplomatic passports are also exempt.
The Government of Canada has stated that the ban aims to ensure that houses are used as homes for Canadian families and are not treated as speculative financial assets. The ban is part of a broader economic plan to address housing affordability concerns, which includes initiatives to build more homes, remove zoning barriers, and provide financing for new rental homes and affordable housing.
Any non-Canadian who violates the ban may face fines of up to $10,000 and may be required to sell their property. While the ban targets foreign ownership, it is important to note that the percentage of foreign homeowners in Canada is relatively small, with less than 6% in major cities like Toronto and Vancouver.
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Financing options for international students
International students in Canada have a variety of financing options available to them. These include scholarships, grants, private loans, and federal loans.
Scholarships and Grants
Many universities, governmental bodies, and private organizations offer scholarships specifically for international students. These scholarships can be based on academic merit, community involvement, or specific fields of study. Scholarships and grants are a great option as they do not need to be paid back.
Private Loans
Private loans are another option for international students. Banks and financial institutions offer private loans, which can be customized to the student's needs. However, these loans may require a cosigner or collateral, and interest rates and terms can vary, so it is important to shop around and understand the options available.
Federal Loans
Canadian citizens or permanent residents may qualify for federal loans, while international students are generally not eligible for these loans and must explore private loan options. MPOWER Financing is one organization that offers no-cosigner, no-collateral student loans to international students in Canada.
It is important for international students to carefully research their financing options and understand the eligibility criteria and loan terms before making any decisions.
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Legal and tax responsibilities of homeownership
International students in Canada who meet certain requirements, including having spent most of the previous five years in the country, are exempt from the ban on foreign nationals buying residential property. However, there are legal and tax responsibilities that they should be aware of before purchasing a home.
Legal Responsibilities
One of the primary legal requirements for international students planning to buy a home in Canada is proving their long-term residency in the country. This typically involves demonstrating physical presence in Canada for a specified period, such as 244 days each year for the past five years. Additionally, filing tax returns in Canada for the same duration is often necessary.
Tax Responsibilities and Benefits
Homeownership in Canada comes with various tax responsibilities and benefits:
- Property Taxes: All homeowners in Canada are required to pay property taxes, which are a significant source of funding for local governments and public services. The amount of property tax varies depending on the municipality.
- Tax Credits and Deductions: Homeowners may be eligible for numerous tax credits, such as the Home Buyers' Amount, the Home Accessibility Tax Credit (HATC), and the CMHC Eco Plus program. These credits can provide significant financial advantages.
- Capital Cost Allowance (CCA): If you own a rental property, you can deduct certain expenses, such as renovation costs, from your taxable income. However, if the property is sold, the value of CCA claims may be subject to capital gains tax.
- Moving Expenses: Moving costs, including travel expenses, moving company bills, hotel stays, and legal fees, may be considered deductible if you relocate more than 40 kilometres away for specific reasons, such as starting a new job or enrolling as a full-time student.
- Home Office Deductions: Individuals who work remotely from their principal residence may be able to claim a portion of their utility bills, homeowners' insurance, internet expenses, and office supplies as business expenses.
- Rental Income: If you rent out your property, remember to declare that income on your taxes. You may then be eligible for deductions on any related expenses, such as maintenance and farmland costs.
- Provincial Credits and Grants: Depending on the province, homeowners may be able to claim various tax credits and grants on their tax returns. For example, British Columbia, Manitoba, New Brunswick, Ontario, and Saskatchewan offer specific tax credits.
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Pros and cons of buying a house as an international student
International students in Canada can buy property, but there are several conditions and regulations that must be met. The Pros and Cons of buying a house as an international student in Canada are outlined below:
Pros:
- International students in Canada can obtain a house, which can be a good investment and provide a stable living environment.
- There are no residency or citizenship requirements for purchasing property in Canada.
- Local banks in Canada offer mortgage options for foreign students.
- Buying a home in Canada can be a step towards permanent residency and can make the transition to Canada easier.
Cons:
- International students must meet strict criteria and conditions to obtain a mortgage and buy a home.
- The process of becoming a homeowner in Canada can be daunting due to lender regulations and requirements.
- There is a maximum purchase price of $500,000 for non-Canadian buyers, which may not be enough to buy a home in some major cities or provinces, such as Ontario or British Columbia.
- International students must provide proof of intent to become a permanent resident and settle in Canada.
- They must also file all required income tax returns and provide proof of physical presence in Canada for a minimum number of days each year.
- The cost of housing in Canada has skyrocketed in recent years, making homeownership unaffordable for many.
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Frequently asked questions
Yes, international students can buy property in Canada. However, there are no specific residency or citizenship requirements that restrict non-Canadians from buying real estate. There are a few important factors to consider, including legal requirements, financing options, and potential tax implications.
International students are generally required to make a larger down payment than Canadian citizens or permanent residents. The typical down payment is at least 35% of the purchase price. This is because Canadian banks consider non-residents a higher risk for mortgage loans. Obtaining a mortgage can be challenging for international students due to their lack of Canadian credit history.
Buying a house in Canada as an international student can provide a stable living situation and can be a long-term investment opportunity. Additionally, students can rent out their place for an extra source of income. However, there may be additional costs such as insurance and repairs, as well as potential market fluctuations affecting the value of the property.
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