BCREA Brief: Reintroduce Foreign Investment to Canada’s Development Sector
In the current housing finance system, new condominium construction is financed through pre-sales. Those pre-sales must hit a certain threshold (60 per cent in British Columbia) before a project can receive financing from lenders. Therefore, policies that expand access to the pre-sale market – such as permitting non-resident participation – can help keep the supply of new housing steady by broadening the pool of capital available to developers.
However, the federal Prohibition on the Purchase of Residential Property by Non-Canadians Act (also known as the Foreign Buyer Ban) prohibits exactly this type of participation. In force until January 1, 2027, the Act bans non-Canadians from buying Canadian residential real estate. While the Foreign Buyer Ban was popular at the time of its enactment in 2023 due to overheated home prices, BC Real Estate Association (BCREA) analysis has questioned its effectiveness, and there’s an argument to be made that it’s stifling new construction at the worst possible moment.
Conceptually, expanding access to pre-sale inventory increases demand for new units at earlier stages of development, reducing inventories and improving project feasibility. These effects, in turn, lead to more housing starts and completions over time. This is particularly important in the current Canadian construction environment where levels of unsold inventory are at multi-decade highs and investor demand is low, leading to delayed and canceled projects.
In a recent BCREA Market Intelligence report, our economists modelled the impact of measures that reintroduce or expand investor and foreign participation in the housing market. Under this scenario, we estimate approximately 39,000 additional housing completions relative to baseline in BC between now and the fourth quarter of 2032. Critically, this represents incremental supply above and beyond the level of new home completions that would occur if market conditions and policies remain unchanged.
On the supply side, our team also modelled measures aimed at lowering development costs and improving project feasibility, such as federal investment to reduce development cost charges, shorten permitting timelines, and streamline approval processes. These initiatives effectively increase the feasible level of housing supply for a given cost structure and financing environment.
When the demand and supply measures are combined – representing both increased investor demand and reduced construction costs – we estimate a larger response, with 66,000 additional completions relative to baseline in BC over the same horizon.
It is also important to note that under the baseline scenario, because of elevated inventory and difficulty with financing, new housing construction and completions are projected to decline in the near term, making housing targets even more difficult to achieve.
This reality highlights why access to global capital is not optional, but essential. Foreign investment, institutional equity, and alternative sources of risk capital will be required to complement domestic financing if Canada is to materially increase housing supply. Addressing nonfinancial barriers remains critical, but without sufficient equity and debt capital at scale, housing targets will remain aspirational rather than achievable.
Against this backdrop, the federal Foreign Buyer Ban operates directly on the pre-sale channel that underpins project financing. By restricting non-resident participation in newly built condominium units in major urban markets, the policy reduces the pool of potential equity at the stage when projects must clear pre-sale thresholds to secure construction financing.
In the current environment of elevated inventory and weak investor demand, this reinforces financing constraints and increases the likelihood of project delay or cancellation, even where long-term housing demand remains strong.
Some narratives among commentators in the housing sector have embedded the concept that investment by non-residents is a direct cause of housing price escalation. In order to make a policy shift more politically palatable, such investment can be restricted to new housing projects (the so-called “Australia Model”), so that pre-sale levels can be met to allow new development to occur without injecting foreign capital into resale housing stock.
RECOMMENDATIONS
REINTRODUCE FOREIGN INVESTMENT TO CANADA’S DEVELOPMENT SECTOR
BC REALTORS® recommend that the federal government:
OPTION 1
Amend the Foreign Buyer Ban to Permit Non-Resident Participation in New Housing Projects Only
Amend the federal Prohibition on the Purchase of Residential Property by Non-Canadians Act to allow non-resident participation exclusively in new housing projects, particularly pre-sale condominium units in major urban markets.
Limiting non-resident participation to new supply would support housing starts and completions while avoiding added competition for existing homes. This approach also responds to public concerns around speculative activity by clearly linking additional demand to the construction of new housing.
OPTION 2
Repeal the Federal Foreign Buyer Ban in Its Entirety
Repeal the Prohibition on the Purchase of Residential Property by Non-Canadians Act in full in recognition of the scale of capital required to achieve federal and provincial housing supply targets.
Meeting Canada’s housing objectives is estimated to require up to $2 trillion in investment, a level of capital that, as has been argued, cannot be met through domestic savings and lending alone.