Investing in Canadian Land: What Foreign Buyers Need to Know

Whether you’re a recently arrived homebuyer or a foreign investor seeking to diversify your portfolio with land for sale in Ontario, the Canadian real estate market offers near-endless opportunity. If you’re prepared to seize it, that is.

Here’s what non-residents need to know about the Canadian real estate market — and actually buying real estate in the Great White North.

Land May Be the Best Play

By definition, unimproved land is less costly than built-up real estate. If your financial resources are limited, you’re likely to favor low-cost investment options — especially considering the point below. In Canada, residential and commercial real estate near major population centers, especially foreign investment havens such as Vancouver and Toronto, is quite dear.

Undeveloped land might be your best play for another reason: in some parts of Canada, foreign landowners are subject to steep closing taxes. In early 2017, Ontario’s provincial government enacted a 15% non-resident buyers’ tax on residential real estate sales within Toronto’s commuter belt. It’s more than enough to upend investors’ carefully calibrated projections. If you’re not absolutely set on a residential investment property in Greater Toronto, consider a lower-cost alternative.

You’ll Probably Need to Put at Least 35% Down

Canadian lenders hold foreign buyers to higher financial standards than their domestic counterparts. Expect to put at least 35% of your offer price down; in some cases, you’ll be asked for 50% or more. This is another powerful argument in favor of lower-cost real estate investments — you can accumulate more, faster, with less adverse impact on your financial position.

Canadian Land Holdings Won’t Fast-Track Your Residency Application

First, the good news: the Canadian government imposes no meaningful size, quantity, or type restrictions on non-resident property purchases. Foreigners can buy with the same abandon as Canadian citizens and permanent residents.

Unfortunately, owning Canadian property has no bearing on your quest for Canadian permanent residency or citizenship. Some countries entice wealthy expat landowners with fast-track citizenship; not so Canada. If you want to make a permanent home in Canada, you’ll need to follow the same rules as everyone else.

Rental Income Can Be Costly

Non-resident owners of Canadian rental property must acquiesce to 25% withholding on gross rental income. It’s possible to reduce net liability by filing taxes with GRA and claiming allowable expenses, but the process is cumbersome enough that many investors choose simply to forgo that step.

You’ll Face Additional Obligations If and When You Sell

Canada Revenue Agency (CRA) has special rules for the “disposition of taxable Canadian property by non-residents of Canada.”

The definition of “taxable Canadian property” is quite extensive: it includes “real or immovable property,” property used for business purposes, designated insurance property, and shares or interests in partnerships or corporate entities that derive 50% or more of their fair market value from taxable Canadian properties.

Before you buy, and again before you sell, review CRA’s rules for non-resident property disposition. If you’re at all uncertain about the rules’ implications, consult a Canadian attorney with experience in non-resident real estate acquisition and disposition.

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