• Buying Property in Canada: The Ultimate Guide

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    Foreign property investors have flooded the Canadian property market in the past years. We’ve seen a similar trend in the US, especially in cities like San Francisco and Los Angeles.

    Personally, I like Canada a lot as it’s politically stable, has great infrastructure, healthcare, education, and a breathtaking nature, just to name a few.

    I’m not alone and cities like Toronto, Vancouver and Ottawa have welcomed many Asians over the years, who have the same perception.

    Here, you’ll find buyers who either want to relocate, send their kids overseas to study, or to have a safe place to store some cash assets.

    As such, the property prices have increased much in the past years, especially in the bigger cities and in British Columbia (BC). Yet, it continues to be a hot spot for overseas investors.

    Therefore, I decided to write this guide where you’ll learn how it works when buying real estate as a foreigner in Canada.

    Topics covered in this article:

    Can foreigners buy property in Canada?

    You have no general issues to buy properties in Canada as a non-resident foreigner. In fact, the buying process is pretty much the same as for local citizens.

    The only major difference is that foreigners are subject to the so-called Non-Resident Speculation Tax (NRST) that I will go into greater detail later.

    Not only can you buy one unit, but several units, including land. This is rarely heard of in Asia.

    Maybe you’ve read my article about buying real estate in Australia, where I explained that foreigners can only own a certain amount of and types of properties, depending on your residency status.

    Getting a residence permit when buying property in Canada

    Foreigners that reside more than six months per year in Canada are considered residents. If you fall into this category, you need to apply for a residence permit.

    To travel in and out of Canada continuously is not legal and you might get prohibited from entering the country if you violate this regulation.

    Another important regulation you need to be aware of is the Non-Resident Speculation Tax (NRST).

    What is the Non-Resident Speculation Tax (NRST)?

    As of April 2017, the Canadian Government has introduced the Non-Resident Speculation Tax (NRST), which requires foreigners to pay an extra tax of 15% at the time of the purchase. The rate is multiplied with the purchase value.

    It’s not hard to understand why the government has taken this step as Canada has experienced a big influx of investors, especially from China and Hong Kong.

    The Canadian citizens (especially Millennials) have suffered much from the increased property prices and the Government has seen no other option than to implement this new tax.

    vancouver-property

    So did the introduction of a flat tax of 15% impact the market? It surely did.

    Property sales in cities like Vancouver fell as much as 40% during the first months, even if the demand has stabilized.

    Under what circumstances do I need to pay the Non-Resident Speculation Tax (NRST)?

    You need to pay the NRST in case you buy a residential property that’s located in the Greater Golden Horseshoe Region (GGH) and:

    • You are not a Canadian citizen or don’t have a permanent residence permit
    • If you buy a piece of land that has at least 1 but not more than 6 houses

    Worth mentioning is that duplexes, triplexes, fourplexes, … , are not treated as single-family units. For example, a triplex is treated as three single-family units.

    In the same way, if you buy seven condo units, you would be exempt from paying the NRST.

    Which areas of Canada are subject to the NRST?

    According to the Ministry of Finance in Ontario, the following areas are covered:

    • City of Barrie
    • County of Brant
    • City of Brantford
    • County of Dufferin
    • Regional Municipality of Durham
    • City of Guelph
    • Haldimand County
    • Regional Municipality of Halton
    • City of Hamilton
    • City of Kawartha Lakes
    • Regional Municipality of Niagara
    • County of Northumberland
    • City of Orillia
    • Regional Municipality of Peel
    • City of Peterborough
    • County of Peterborough
    • County of Simcoe
    • City of Toronto
    • Regional Municipality of Waterloo
    • County of Wellington
    • Regional Municipality of York

    Process when buying property in Canada

    Now that we know more about the property ownership requirements, it’s time to have a look at the buying process.

    Your first step should (of course) be to confirm your budget and consider why you want to invest in Canada.

    1. Make a budget and write down your goals

    Asians are famous for buying expensive property and not rarely a multiple amount of units at a time. The budgets often stretch between USD 500,000 – 1,000,000 per unit.

    However, even if Canada attracts many high-net individuals who want to diversify their portfolios and allocate some cash assets, you can still find properties in the lower price range.

    When you make your budget, pay attention to the property taxes, the stamp duty and the interests to be paid, for example. Check how your country’s currency has performed to the Canadian dollar in recent years and what the predictions are.

    At the moment I’m writing this article, the Canadian dollar is still weak to both the Chinese Yuan, the Hong Kong dollar, and the Singaporean dollar (SGD).

    Thus, it’s important to choose your investments wisely, depending on your goals. A multiple of units can give you both higher rental incomes and appreciate more in value compared to a single unit. Also, you’ll be able to diversify.

    toronto-tram

    Just keep in mind that having several units also mean more work on your side. To be a landlord is an occupation in itself and demands responsibility and availability.

    Who should take care of the properties? What costs does that bring you?

    2. Finding a real estate agent in Canada

    As a foreign investor, you should hire a real estate agent, often referred to as realtors. The realtor can help you with consultancy and to find a property that suits your needs.

    So what’s a realtor?

    Shortly speaking, in Canada, a realtor is a real estate agent that is a member of the CREA (the Canadian Real Estate Organization).

    If you manage to find a good realtor, you’ll increase your chances of coming across a serious person.

    What are the responsibilities of a realtor?

    Below I’ve included some of the main duties of Realtors:

    • To provide you a “standardized”, high quality service
    • They have access to the MLS (Multiple Listing Service)
    • The Realtor knows about your chosen area, such as prices and trends
    • A Realtor continuously and actively learn about the latest trends and accumulate new knowledge

    In case you have difficulties to communicate verbally in English, try to find a realtor that speaks your native language, like Chinese or Cantonese.

    You’ll have no issues finding a realtor that speaks Mandarin or Cantonese in Canada nowadays. Many real estate agencies hire persons that speak these languages fluently to improve communication with Asian clients.

    This is something we see in the UK, the US and Australia as well.

    How can I find a realtor as a foreign buyer in Canada?

    As there are many Asian investors in Canada, ask your friends, relatives and or other connections to see if they have any recommendations of realtors.

    I also recommend that you make some research on the internet. You can also ask CREA for recommendations. It’s important that your realtor has a good knowledge of the local area where you plan to buy.

    What should I ask the realtor?

    Some questions you can ask are:

    • Do you have any testimonials or case studies?
    • How many properties have you sold the past years?
    • What will you help me with through this process?
    • Will I need to have any direct contact with the seller?
    • Do you have a license showing that you’re a member of CREA?
    • Are there any fees I’m not aware of yet?
    • Can you explain the buying process for me?
    • Which areas do you work in?
    • Did you have any clients from my home country before?

    Make your due diligence and add questions to the list.

    3. Getting a mortgage as a foreigner in Canada

    As explained above, foreigners have the opportunity to receive mortgages in Canada.

    First of all, contact some local Canadian branches and ask them what kind of requirements they have for foreign borrowers. This can be done via emails and by phone.

    Regulations change all the time, so you don’t want to risk that the information you read on the internet is outdated.

    Opening a bank account as a foreigner in Canada

    If you have an international bank like HSBC or Citibank, you sometimes have the option to open a bank account before you even fly to Canada.

    The banks will make sure that:

    • You get a new account before leaving your home country
    • You receive your HSBC Bank Canada credit and debit cards when you arrive
    • There are no complications making transactions from your home country to Canada
    • To finalize the account, you just need to bring your proof of address and your passport

    Before you leave to Canada, be sure to have all your questions answered and set up a meeting with a local branch in your home country.

    I recommend you to contact a lender early in the process to get a pre-approval of the mortgage. The lender can see if you’re credible to get a loan or if there are any issues that can create problems later.

    The lender will also sit down with you and review different loan options, to make sure that you can get the best loan offered.

    canada-mortgage-foreigners

    What down payment do I need to pay as a foreigner in Canada?

    After you’ve opened a Canadian bank account, you usually pay a down payment of at least 35%.

    Providing your credit history

    To apply for a loan in Canada, you need to have a credit history. This is applicable in many other Western countries, including the US and the UK.

    HSBC’s international banking center can submit your credit history from your home country to Canada directly, in case you’ve had an HSBC account for at least 3 months.

    If you don’t have any credit history, you can apply for an HSBC credit card and make continuous purchases and paybacks to build up a credit history over time.

    4. Placing an offer on a property

    When you’ve found a property you like, it’s time to make an offer. In Canada, this is called an Offer-To-Purchase.

    The realtor will help you to prepare the offer and to make the contract.

    5. Finding a solicitor (property lawyer) in Canada

    I also recommend you to hire a solicitor, at least when dealing with big transactions. The Solicitor will help you to prepare the offer, in case the realtor is not fully capable of doing so.

    The solicitor will also check the title and confirm that there are no hidden liens or encumbrances before you decide to buy the property.

    6. Placing an offer on a property

    Now it’s time to submit your offer to the seller. The offer will normally include:

    • Your offered price
    • What’s included (for example appliances, furniture, how big land area)
    • Deposit
    • How the money will be paid to the seller (frequency and amounts)
    • The date when you will be officially owning the house and get the keys, the so-called Closing date
    • Whether your offer is conditional or unconditional. A conditional offer is safer as you’ll be able to withdraw from the deal in case some criteria aren’t met

    Be sure to let a third party make an inspection of the property before closing the deal. There might be issues with the property that you cannot find yourself.

    7. Submitting your deposit

    When you’ve placed your offer, you usually need to provide a deposit of around 5%, but it differs, depending on where you buy the property.

    In case you withdraw from the deal, the deposit will be taken.

    8. Getting a property insurance

    You’ll need to insure your house for the lender to give you a mortgage.

    Do research and ask your realtor if he or she can help you to find good insurance.

    Property taxes in Canada

    Below I’ve listed the different taxes you need to pay when buying, holding and selling real estate as a foreigner in Canada.

    Non-Resident Speculation Tax (NRST)

    As mentioned above, you need to pay a Non-Resident Speculation Tax under certain circumstances. It’s a flat rate of 15%.

    Stamp duty for foreigners

    In Canada, you don’t need to pay stamp duty. This is a bit rare, as stamp duty is often used in other countries whereMalaysia, Hong Kong, and the UK are just some examples..

    Shortly speaking, stamp duty is charged when transferring titles and ownership related documents from the seller to the buyer.

    Withholding tax

    Besides the above mentioned taxes, you need to pay a withholding tax when selling property. In short words, a withholding tax assures that the Canadian government gets it’s shares when you sell the property.

    At the moment, the withholding tax is 25% for foreigners. Below is an example of how the withholding tax is calculated when selling a property.

    Withholding tax – Calculation example:

    Let’s say that you paid USD 100,000 for a property 5 years ago and that you sell it for USD 500,000 (a good return, right).

    • Your lawyer will keep USD 125,000 (USD 500,000 * 25%) from the new buyer
    • You apply for a Certificate of Compliance
    • The amount to be paid to the CRA (Canada Revenue Agency)
      = (USD 500,000 – USD 100,000) * 25% = USD 100,000
    • An amount of USD 125,000 – USD 100,000 = USD 25,000 is released
    • When you submit your tax return a year later, you’ll need to pay a tax of roughly USD 44,000 (with todays exchange rate)
    • You enjoy a payback of around USD 44,000 – USD 25,000 = USD 19,000 from CRA

    You can save tons of money if you pay your taxes and keep track of the previous amounts paid!

    Capital gains tax for foreigners

    In Canada, only 50% of your capital gains will be subject to a capital gains tax.

    For example, if you made a profit of USD 100,000 and the local capital gains tax is 30%, you’ll need to pay the following amount:

    USD 100,000 * 50% * 30% = USD 15,000

    The same method is used for capital losses, meaning that you can use any losses to offset future gains when paying taxes. That’s very important to keep in mind when you calculate your balances.

    Another good thing is that you can use a capital loss retroactively for any of the past three years.

    Can I get a long-term visa or citizenship when buying property in Canada?

    You’ll not be able to directly receive a visa or citizenship if you buy a property, unfortunately.

    To be able to stay for a longer period than 6 months a year, you’ll need to have a student visa, working visa, or be a permanent resident.

    Bear in mind that “visa runs”, where you exit the country for a short time and then come back, might prohibit you from entering Canada again.

    Best places to buy property in Canada

    Foreign investors have focused primarily on the bigger cities, like Toronto and Vancouver previously. That’s why prices have been skyrocketing and the government has introduced an additional flat tax of 15% for foreigners, since 2017.

    As property becomes more expensive in these cities, Asians now look for property in smaller cities. Recently, Canadians raised their eyebrows as Asians has started to invest in less urban places they wouldn’t give a thought to.

    As always, if you plan to get good rental yields, you need to look for cities that have good universities, a good future outlook in terms of job creation and economy, investment in infrastructure, and more.

    Buying property in Ontario

    niagara-falls-ontario-canada

    Ontario has the most cities where property prices are still relatively low but predicted to grow much in the coming years.

    As such, I will only focus on Ontario.

    Thunder Bay

    Thunder Bay has seen rental increases of more than 20% in the past years. Still, the property prices are comparably low and average at less than 3 times the average disposable income (in bigger cities like Vancouver and Toronto, the ratio can be up to 6 times).

    The city has a lot of potentials, most importantly, it attracts a lot of jobs, especially in education and the medical industry.

    Lakehead University is a great university located in Thunder Bay, for example. Each year, almost 4,000 students graduate from here and many look for jobs in the near area.

    With a breathtaking nature and wildlife, you should definitely have a look at this place.

    Brantford

    Brantford is slightly more expensive in comparison to Thunder Bay, but still affordable compared to the bigger cities.

    Same as it goes with Thunder Bay, the local economy is strong and property prices predicted to rise over the years.

    One drawback of Brantford is that the city doesn’t have many universities.

    Guelph

    Guelph has everything from great education, job opportunities and property prices that are predicted to grow much.

    In fact, Guelph has one of the most popular universities in Ontario, the University of Guelph.

    Having 120,000 inhabitants and more than 20,000 students (!), you should definitely have a look at this city.

    In which other cities can I buy property in Ontario?

    Some other cities you should definitely have a look at in Ontario are:

    • Ottawa
    • Lethbridge
    • Quinte
    • London
    • St. Thomas

    Am I allowed to rent out the property as a non-resident foreigner?

    Foreigners are allowed to rent out their properties in Canada, and the rental incomes are usually great.

    Even if the rental incomes have increased a lot in smaller cities like Thunder Bay, you can also get a decent amount if you decide to invest in cities like Toronto and Vancouver.

    The easiest way to rent out your property is to find an agency to do it for you. They can handle all the communication with tenants and maintain the property for you.

    As you’ll need to deposit 25% of your rental income to the CRA (Canada Revenue Agency), you better hire a withholding agent to do so for you.

    The agency managing your property can help you to act as your withholding agent.

    Getting deductions for maintenance of property

    Beware that you’ll be able to reduce your withholding tax by deducting costs you paid for property maintenance for example.

    Let’s say that you gain a monthly income of USD 500 on rentals. At the end of the year, you have deposited USD 500 * 12 months * 25% = USD 4500 to the CRA.

    However, if you’ve paid expenses for maintenance of the property, that are considered as relevant, you’ll be able to deduct these from the amount paid to CRA.

    For example, say that you make a total yearly payment of USD 4500 to CRA and paid relevant expenses of USD 700. You’ll then only pay USD 4500 – USD 700 = USD 3800 to CRA.

    FAQ

    Below you can find some frequently asked questions and my replies.

    Can I get PR if I buy property in Canada?

    No, you cannot become a PR simply by purchasing real estate in Canada.

    Can international students buy houses in Canada?

    Yes, foreign students have no issues to buy property in Canada. And you can even get a local bank loan.

    Normally, you’ll need to show proof of your international credit history and prepare a down payment of at least 35%. The bigger down payment you can put on the table, the better conditions you get.

    Foreign students are considered temporary residences, you can find more information about the mortgage that Scotiabank has to offer on their website.

    Do you need a lawyer to buy a house in Canada?

    Yes, you need to hire a notary or a lawyer to transfer the property from the seller.

    How much do I need to pay for a house in Canada?

    Prices have increased immensely over the years but we’ve started to see a cool down in the market. According to the Toronto Real Estate Board, prices fell with 4.3% in 2018 for all types in the Greater Toronto Area. Properties were averaging at $787,300 there.

    At the same time, the prices for detached properties, townhomes, and condominiums decreased by 2.7% from December 2017 to December 2018 in Vancouver and average at $1,032,400.

    Surprisingly, property prices hit a 20 year low in Vancouver. Looking at detached homes alone, the average price fell to $1,479,000.

    How long can you live in Canada without a visa?

    You can stay up to 6 months a year without a visa, in general.

    How safe is Vancouver?

    Vancouver is safe in general and unprovoked violence is rare. However, it’s a big city and you should keep a smart lookout.

    Conclusion

    Property prices have increased a lot in Canada for the past years and it’s greatly popular among Asian investors.

    You can still find good deals in bigger cities like Vancouver and Toronto but should target smaller cities for higher yields, especially in Ontario.

    Surprisingly, you don’t need to pay any stamp duty, which is uncommon in other countries. If you’re a foreigner, you’re generally subject to the new NRST tax which has a flat rate of 15%.

    A common question asked is whether you can become a permanent resident when buying real estate in Canada. Unfortunately no, but you need to be a student, work or conduct business in Canada.

    12 Responses to “Buying Property in Canada: The Ultimate Guide

    1. Ivan Malloci at 4:32 pm

      thank you for this article!

    2. mayuri at 7:48 am

      hi.your article is very informative and useful for foreign buyers.Thanks.A humble request to provide a few names of canadian realtors, solicitors and banks offering mortgage to foreign buyers and it will be more useful to us.

      1. Marcus Sohlberg at 12:40 pm

        Hi Mayuri,

        Please send us an email.

        1. Gurjot at 8:25 pm

          Hi, This is a very well written and informative article. Even I think it will be helpful if you can email some canadian realtors, solicitors and banks offering mortgage to foreign buyers for reference.
          Thanks a ton.

    3. Ruchi at 12:34 pm

      Hi,
      I am an international student in Canada (Montreal). Can you please provide me with the information related to buying a two-bedroom apartment in Montreal. I would, especially, need information pertaining to property prices in Montreal, and whether the NRST is applicable in Montreal or not.

      1. Marcus Sohlberg at 11:20 am

        Hi Ruchi,

        I’m not familiar with the property market in Montreal unfortunately. I recommend you to contact a real estate agent there to clarify questions regarding property prices and NRST, for up-to-date information.

    4. Michael at 1:11 pm

      Hi, This is an informative article and useful. It will be helpful if you can email some canadian realtors and solicitors to foreign buyers for reference.
      Thanks a lot

      1. Marcus Sohlberg at 8:03 am

        We haven’t compiled a list with Canadian realtors yet unfortunately.

    5. Amit Shah at 6:45 am

      Hello, This is very informative article. you have pointed out everything in detail It will be of great help, if you can mail some Canadian realtors and solicitors to foreign buyers for reference.
      Thanks a lot

    6. Wasim Masud at 1:58 pm

      Hi Marcus,
      Great article. I am a little confused. Is withholding tax to be paid when selling the property? In the article it is written ‘when buying the property’.
      ‘Withholding tax
      On top of the above mentioned taxes, you’re need to pay a withholding tax when buying property.’

      Also is Capital Gain tax also to be paid when selling?

      Thanks in advance.
      Best regards

      1. Marcus Sohlberg at 8:16 am

        It should say selling because it says “Below is an example of how the withholding tax is calculated when selling a property.” directly after. I updated it. The capital gains tax is paid when selling too.

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