Can I Buy a House in Canada as a Non-Resident?

Canada’s real estate market often attracts interest from individuals residing outside the country, whether for investment purposes, future relocation, or as a second home. The Canadian government has implemented various measures to manage housing affordability and availability for its citizens. While these measures include certain restrictions on foreign ownership of residential property, specific pathways and exemptions may allow non-residents to acquire property under defined circumstances.

Eligibility and Restrictions for Non-Residents

A “non-Canadian” for residential property purchase includes individuals who are not Canadian citizens, permanent residents, or registered under the Indian Act. This definition also extends to corporations not incorporated in Canada, or Canadian-incorporated corporations and trusts controlled by non-Canadians.

A significant restriction is the “Prohibition on the Purchase of Residential Property by Non-Canadians Act” (PPRNA), which came into effect on January 1, 2023. This legislation initially imposed a two-year ban on non-Canadians purchasing residential properties, with the Canadian government announcing an extension until January 1, 2027. The primary goal of this ban is to prioritize housing availability for Canadian citizens and permanent residents, addressing concerns about housing affordability.

The PPRNA defines “residential property” as real or immovable property situated in Canada that contains no more than three dwelling units. This includes detached houses, semi-detached houses, row-house units, and residential condominium units. The prohibition does not apply to buildings with four or more dwelling units, or to properties located outside Census Metropolitan Areas (CMAs) and Census Agglomerations (CAs), which are typically smaller population centers.

Several exemptions exist within the PPRNA that permit non-Canadians to purchase residential property. Temporary residents, such as those on study or work permits, may be eligible if they meet specific conditions, which can include having been physically present in Canada for a significant period and not having previously purchased property during the ban. Another exemption applies to non-Canadians intending to purchase residential property for development purposes, encouraging investment that contributes to increasing the housing supply. Additionally, refugees and protected persons are generally exempt from the prohibition. Acquiring residential property in contravention of the PPRNA can result in a fine of up to $10,000 and may lead to the forced sale of the property.

Financial and Tax Considerations

Securing a mortgage often requires a larger down payment compared to Canadian residents, typically ranging from 20% to 35% or even higher. Lenders may also require these funds to be held in a Canadian bank account for a period, usually between 30 to 90 days, and may not accept gifted funds. Non-resident mortgages generally come with stricter terms, potentially higher interest rates, and a maximum amortization period of 25 years.

Buyers are subject to various taxes. All property purchases incur provincial property transfer taxes (PTT), which vary by province and are calculated based on the property’s fair market value. For instance, in British Columbia, the general PTT rate is 1% on the first $200,000, 2% up to $2 million, and 3% on amounts exceeding $2 million.

Several provinces also impose additional taxes specifically on non-resident buyers. Ontario applies a Non-Resident Speculation Tax (NRST) of 25% on the value of residential property located anywhere in the province. Similarly, British Columbia levies an Additional Property Transfer Tax (APTT) of 20% on foreign entities acquiring residential property in specified areas, such as Metro Vancouver and the Capital Regional District.

For newly constructed residential properties, the Goods and Services Tax (GST) or Harmonized Sales Tax (HST) is typically applied, often at a rate of 13%. While rebates for GST/HST on new housing are generally available to purchasers who intend to use the property as their primary residence, non-residents usually do not qualify for these specific rebates. However, a New Residential Rental Property (NRRP) rebate may be available for new or substantially renovated properties acquired for long-term rental purposes.

Canada also implemented a federal Underused Housing Tax (UHT), an annual 1% tax on the value of vacant or underused residential properties, effective January 1, 2022. This tax primarily targets foreign national owners, requiring them to file an annual UHT return, even if they qualify for an exemption, to avoid significant penalties. Exemptions can include properties occupied for a minimum of six months in a calendar year or rented on a long-term basis.

Ongoing annual property taxes are levied by the local municipality to fund public services. If the property is rented out, non-residents face a 25% withholding tax on gross rental income, which the tenant or property manager must remit to the Canada Revenue Agency (CRA). Non-residents can elect under Section 216 to be taxed on their net rental income after eligible expenses, potentially reducing their tax liability.

Upon selling a Canadian property, non-residents are subject to capital gains tax on any profit realized from the sale. The buyer is generally required to withhold 25% of the gross purchase price and remit it to the CRA, a rate that will increase to 35% for non-depreciable property from January 1, 2025. To reduce this withholding amount to a percentage of the capital gain rather than the gross proceeds, the non-resident seller must obtain a Certificate of Compliance from the CRA.

The Purchase Process

The first practical step involves engaging a real estate agent experienced in assisting non-resident buyers. An agent can help navigate the Canadian housing market, identify suitable properties, and understand regional market nuances. They can also assist in preparing and presenting an offer to purchase.

Once a desired property is identified, a formal offer to purchase is prepared. This document outlines the proposed purchase price, the amount of the deposit (typically 5% to 10% of the purchase price), desired closing date, and any conditions that must be met before the sale becomes firm. Common conditions include a satisfactory home inspection and securing financing. The deposit is held in a trust account by the seller’s real estate brokerage until the transaction closes.

Engaging a Canadian legal professional, such as a lawyer or notary, is a necessary step for all property purchases. The legal counsel performs comprehensive due diligence, which includes conducting a title search to ensure there are no existing claims or liens against the property and reviewing all legal documents. They also verify property tax status, calculate all applicable taxes and fees, and prepare necessary mortgage documentation. For non-residents, having a Canadian lawyer is particularly beneficial as they can often handle the closing without the buyer needing to be physically present in Canada.

Before finalizing the purchase, it is advisable to conduct a professional home inspection to assess the property’s condition and identify any potential issues. A property appraisal may also be required by the lender to determine the property’s market value.

On the agreed-upon closing date, the transaction is finalized. The buyer’s legal representative ensures all necessary funds, including the remaining down payment, mortgage funds, and various closing costs, are available. These costs include legal fees, property transfer taxes, and any specific non-resident taxes like the NRST or APTT, which must be remitted. Once all documents are signed and funds are exchanged, the lawyer registers the transfer of ownership with the provincial land titles office, officially making the buyer the new owner.

Post-Purchase Obligations

After acquiring property in Canada, non-residents face ongoing obligations. Owners must consistently pay annual property taxes levied by the local municipality, which contribute to local services. The federal Underused Housing Tax (UHT) requires an annual filing using Form UHT-2900 by April 30 of the following year, even if an exemption applies. Failure to file this return, even when no tax is due, can result in significant penalties, such as a minimum of $5,000 for individuals.

If the property is rented out, the 25% withholding tax on gross rental income must be remitted monthly to the Canada Revenue Agency (CRA) by the tenant or a Canadian agent. Many non-resident owners engage a professional property management company to handle rent collection, tax remittances, and general maintenance, ensuring adherence to Canadian tax laws and property upkeep.