Did Canada’s Foreign Buyer Ban Actually Work? What It Means for Toronto’s Condo Market

Canada foreign buyer ban rules are currently scheduled to expire on January 1, 2027. As that deadline approaches, an important question is starting to surface across the real estate industry: did the policy actually make housing more affordable?

The federal government introduced the Prohibition on the Purchase of Residential Property by Non-Canadians Act in 2023 as part of a broader effort to improve housing affordability. The idea was relatively straightforward: reduce foreign demand for Canadian residential real estate and give domestic buyers more opportunity to enter the market.

Several years later, however, the impact appears far more complicated.

Did Canada’s Foreign Buyer Ban Work?

Canada’s housing affordability problem has never been driven by one factor alone.

Home prices are influenced by interest rates, population growth, housing supply, construction costs, land availability, development charges and the time it takes to bring new homes to market.

Foreign ownership became a highly visible part of the affordability conversation, but foreign purchasers represented a relatively small percentage of overall Canadian real estate transactions.

According to a recent analysis published by Real Estate Magazine, foreign buyers represented approximately 3% to 5% of transactions in Canada’s largest cities at their peak.

If foreign buyers accounted for only a small portion of overall sales, removing them from the market was unlikely to solve Canada’s much larger affordability problem on its own.

Foreign Buyers Were a Small Part of the Market

Reducing foreign demand may have removed some competition from the resale market, particularly in Canada’s largest cities.

But housing affordability remained under pressure.

Interest rates increased dramatically after the pandemic, construction became more expensive and Canada’s housing shortage continued. At the same time, buyers faced higher borrowing costs that significantly reduced purchasing power.

This raises an important question: If foreign buyers weren’t responsible for the majority of housing demand, did banning them address the right problem?

The answer becomes even more complicated when we look at Canada’s new construction market.

The Unexpected Impact on New Condo Construction

The foreign buyer ban may have had a much greater impact on the pre-construction condominium market than on resale home prices.

New condo developments typically depend heavily on presales. Before construction financing can be secured and a project can move forward, developers often need to demonstrate that a significant percentage of the building has already been sold.

According to the Real Estate Magazine analysis, developers may need approximately 70% of units presold before financing and construction can proceed.

Foreign investors historically represented a larger share of these early-stage pre-construction purchasers than they did in the overall resale market. The same analysis estimates that roughly one in 10 presale condo buyers were foreign purchasers.

Removing that group may not have dramatically changed resale prices, but it potentially made it more difficult for some developments to reach the sales thresholds required to secure financing.

When projects can’t reach those thresholds, construction can be delayed or cancelled entirely.

Why This Matters for Toronto’s Condo Market

This issue is particularly important in Toronto and the GTA.

Condominium development has traditionally been one of the primary ways the region adds large amounts of new housing. With limited land available in established Toronto neighbourhoods, higher-density development plays an important role in accommodating population growth.

When fewer condo projects reach the construction stage today, the effects can continue for years.

A condo development that fails to launch in 2026 isn’t simply a problem for today’s developers or investors. It represents housing that may not exist in 2029, 2030 or beyond.

That creates an uncomfortable contradiction in housing policy.

A measure designed to improve affordability by reducing demand could potentially contribute to future supply problems if it also makes new developments more difficult to finance and build.

Could Canada Take a Different Approach?

The choice doesn’t necessarily have to be between banning foreign buyers entirely or allowing unrestricted foreign investment in Canadian housing.

Canada could instead consider treating existing homes and newly constructed properties differently.

Allowing Foreign Investment in New Construction

Australia has used an approach that generally directs foreign investment toward new housing rather than established residential properties.

A similar model in Canada could potentially maintain restrictions intended to protect domestic buyers competing for existing homes while allowing international purchasers to invest in newly constructed housing.

That distinction matters.

When someone purchases an existing home, they are competing for housing that already exists. When capital helps a new development reach its presale requirements and proceed to construction, it can contribute to the creation of additional housing supply.

Canadian developers have also called on the federal government to consider exemptions for newly constructed properties, arguing that foreign purchasers can play an important role in helping developments reach the financing stage.

Ending the Ban Wouldn’t Fix the Condo Market Overnight

Allowing Canada’s foreign buyer ban to expire would not suddenly solve the challenges facing the condo market.

Developers are still dealing with high construction costs, expensive financing, development charges, affordability constraints and significantly weaker investor demand.

Those challenges will remain regardless of what happens to the foreign buyer ban.

However, allowing another group of potential purchasers back into the pre-construction market could make it easier for some projects to achieve the presale thresholds necessary to secure financing and move forward.

And in a country that continues to struggle with housing supply, getting more viable projects built matters.

The Bigger Housing Supply Question

The debate surrounding Canada’s foreign buyer ban highlights a much broader issue with housing policy.

Housing affordability isn’t simply about reducing demand. Canada also needs enough homes for the people who live here today and the households that will need housing in the future.

Policies designed to restrict demand may provide relief in certain areas of the market, but their impact on future housing construction also needs to be considered.

As the January 2027 expiration approaches, policymakers will have to decide whether the ban should continue, expire entirely or evolve into a more targeted policy that treats existing homes and new construction differently.

For Toronto, that decision could have implications far beyond foreign ownership.

It could help determine how much new condominium supply actually gets built in the years ahead.

What Does This Mean for Toronto Buyers, Sellers and Investors?

Real estate headlines rarely tell the entire story.

Policies that appear positive for buyers on the surface can have very different effects depending on the property type, neighbourhood and segment of the market.

For Toronto buyers, sellers and investors, understanding how government policy, inventory, financing and new construction interact is increasingly important when making real estate decisions.

The foreign buyer ban is only one piece of a much larger housing puzzle, but with its scheduled expiration approaching, it’s a policy worth watching closely.

Thinking about buying, selling or investing in Toronto or the GTA? Contact David Cinelli to discuss how current market conditions and changing housing policies could affect your next move.