What a Foreign Buyer Needs to Do Before Buying a Home in Victoria, BC

What are the Legal Requirements for Foreigners Purchasing a Home in Victoria?

One of the most important aspects for foreign buyers to understand is the legal framework governing property purchases in British Columbia.

1. Citizenship and Residency Status:
   • Do You Need to Be a Canadian Citizen or Permanent Resident? No, you do not need to be a Canadian citizen or have a permanent residency (green card) to purchase property in British Columbia. Foreigners, including those without any status in Canada, are allowed to buy property in BC. However, non-residents and foreign buyers are subject to additional regulations and taxes, which are crucial to consider.
     
     
2. Compliance with the Foreign Buyer Ban:
   • Since the implementation of the foreign buyer ban in 2023, non-residents and non-Canadians are generally prohibited from purchasing residential property in Canada until 2027. There are, however, exemptions, including for those who hold a valid work permit or are international students meeting certain conditions. It’s essential to confirm whether you qualify under these exemptions before proceeding with a purchase.
     
     
3. Opening a Canadian Bank Account: Foreign buyers need to open a Canadian bank account to handle financial transactions related to the property purchase, including down payments and mortgage payments.
   
   
4. Obtaining Pre-Approval for a Mortgage: Foreign buyers can apply for mortgages through Canadian banks, but they may face stricter lending criteria, including higher down payment requirements, often around 35%.
   
   
5. Hiring a Real Estate Lawyer: A real estate lawyer experienced in foreign transactions is crucial to ensure compliance with all legal requirements and to assist with the necessary documentation and contracts.

Tax Implications on a Purchase Price of $1 Million

If you’re a foreign buyer purchasing a property in BC, especially in regions like Metro Vancouver, you will face specific taxes:

1. Property Transfer Tax (PTT):
   • This tax applies to all property purchases in BC. For a $1 million home, the PTT would be $18,000.
     
     
2. Additional Foreign Buyers’ Tax:
   • Foreign buyers are subject to an additional 20% tax on the property’s purchase price. For a $1 million home, this tax would be $200,000, bringing the total tax to $218,000.

When One Partner Is Canadian and the Other Is American

When purchasing a home, if one partner is a Canadian citizen or permanent resident and the other is a foreign national (such as an American), the situation becomes more complex:

1. Foreign Buyer Ban:
   • If the Canadian partner is the primary buyer or holds the majority ownership of the property, the purchase may be exempt from the foreign buyer ban. However, this is subject to specific conditions, and it’s crucial to consult with a real estate lawyer to navigate the details.
     
     
2. Tax Implications:
   • Even if one partner is Canadian, the foreign buyers’ tax may still apply if the non-Canadian partner has any ownership interest in the property. In some cases, structuring the purchase under the Canadian partner's name could mitigate this tax, but this should be carefully reviewed with a legal professional.
     
     
3. Joint Ownership:
   • Joint ownership between a Canadian and a foreign national could impact the financing, tax obligations, and eligibility for exemptions. The Canadian partner may also need to sign agreements ensuring they are the primary resident, which could affect future sales or transfers of ownership.

Why the Foreign Buyer Ban Was Implemented Until 2027

The Canadian government introduced the foreign buyer ban as part of its strategy to cool the overheated real estate market and address the housing affordability crisis. This ban aims to reduce speculative buying and ensure more properties are available to Canadian residents.By restricting foreign ownership, the government hopes to stabilize the market, making housing more accessible for locals. The ban will last until 2027, during which time the government will assess its impact on housing affordability and market stability.

Conclusion

Purchasing a home in British Columbia as a foreign buyer involves navigating a complex landscape of legal requirements, taxes, and regulations. Whether you’re a non-resident or a couple with mixed residency statuses, it’s essential to work closely with a real estate agent and lawyer who understand the intricacies of the BC real estate market. By doing so, you can ensure a smooth transaction and make an informed decision about your investment.