What goes up must come down.
At least, that looks like what the story is going to wind up being for the Canadian housing market. The country is reportedly set to announce that it will ban foreign purchases of residential real estate for two years.
"The foreign buyers ban will apply to condos, apartments, and single residential units," according to CTV. "Permanent residents, foreign workers, and students will be excluded from this new measure. Foreigners who are purchasing their primary residence here in Canada will be exempt."
The effects will likely be dramatic, as foreign purchases of real estate accounted for a lot of the bid that helped Canadian housing skyrocket to begin with.
"The timing is a classic case of closing the barn door after the horses have left," ForexLive's Adam Button wrote this week. He noted that the market had already started to cool in March amidst interest rate hikes.
After calling the housing market top on Bloomberg last month, Button says this action by the government "certainly adds" to his conviction. He wrote:
"The question now is whether it will be a soft or hard landing. These measures from the Federal government are being combined with provincial measures and BOC hikes to create a perfect storm in a market that was already way out of line."
As recent as last fall we were documenting how rural shacks were selling for as much as 37% above asking price within days of being listed.
A rancher built in the 1970s had an asking price of $998,000 in June 2021 and sold later that month for $1,365,000. Just days on the market, a fierce bidding war broke out with 13 bidders who ultimately bid up the price 37% above list.
"There wasn't a lot of inventory, and there was another property that had sold recently in multiple offers, so we wanted to take advantage of any leftover buyers," Toronto-based agent Luisa Piccirilli said at the time.
Piccirilli described the bidding war mainly between those who wanted to escape city life and wanted a backyard.
"There's an exodus of people leaving the city and wanting more property and land," Piccirilli said.
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