Property Purchase by Non-Residents in Canada: Rules and Financing

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Buying Property in Canada as a Non-Resident: Regulatory Framework and Financing

The purchase of residential properties in Canada by non-residents is a topic that has undergone major regulatory changes since 2023. Understanding the current legal framework, available financing options, and tax obligations is essential for any foreign buyer considering a real estate investment in Canada, particularly in Quebec.

The Ban on Purchases by Non-Canadians

The Prohibition on the Purchase of Residential Property by Non-Canadians Act came into force on January 1, 2023 and has been extended until January 1, 2027. This law prohibits persons who are neither Canadian citizens nor permanent residents from purchasing residential properties located in census metropolitan areas (CMAs) and census agglomerations (CAs) as defined by Statistics Canada. Violators face fines of up to $10,000 and a forced sale order for the property.

Exceptions to the Ban

Temporary residents with work permits: holders of a valid work permit who have filed tax returns in Canada for at least three of the last four tax years and have not purchased more than one residential property.
International students: persons enrolled in a designated learning institution, residing in Canada for at least five years, and purchasing a property whose price does not exceed a determined threshold.
Properties outside urban areas: properties located outside CMAs and CAs are not covered by the ban.
Recreational properties and vacant land: certain categories of properties are excluded from the ban, including cottages and undeveloped land.
Refugees and protected persons: persons who have been granted refugee or protected person status in Canada are exempt.
Spouses of citizens or permanent residents: joint purchase with a spouse who is a Canadian citizen or permanent resident is permitted.

Mortgage Financing for Eligible Non-Residents

Non-residents who are eligible to purchase property in Canada face more restrictive financing conditions than residents. Mortgage insurance (CMHC, Sagen, Canada Guaranty) is not available to non-residents, meaning a high-ratio loan (down payment below 20%) is not an option. The minimum down payment required by most lenders ranges from 35% to 50% of the purchase price. Interest rates are generally marked up by 0.25% to 1.00% compared to rates offered to residents, due to the additional risk perceived by the lender. The number of financial institutions willing to lend to non-residents has decreased, making the use of a specialized mortgage broker all the more important.

Tax Obligations for Non-Resident Property Owners

Tax on Rental Income: Non-residents who rent their property are subject to a 25% withholding tax on gross rent. However, they can choose to file an income tax return under Section 216 of the Income Tax Act to be taxed on net rental income (after deducting expenses), which is generally more advantageous.
Capital Gains Tax on Sale: Upon sale, the non-resident must obtain a clearance certificate (form T2062) from the CRA before or within 10 days of the sale. A withholding of 25% to 50% of the sale price may be required by the notary if the certificate is not obtained in time. The actual tax is calculated on 50% of the realized capital gain.
Underused Housing Tax (UHT): The fédéral 1% tax applies annually on the value of residential properties held by non-residents, unless an exemption applies (property rented for at least 180 days per year, for example). An annual return is mandatory even in cases of exemption.
Provincial and Municipal Taxes: Quebec does not currently impose a specific non-resident speculation tax as British Columbia and Ontario do. However, regular municipal property taxes, land transfer duties upon purchase, and provincial income tax on rental income apply normally.

Frequently Asked Questions

Can a foreigner still buy property in Canada in 2026?

The ban on residential property purchases by non-Canadians in urban areas is in effect until January 1, 2027. However, several exceptions exist: temporary residents with a valid work permit (under conditions), international students (under conditions), recreational properties, vacant land, and properties outside defined urban areas. It is essential to verify your specific eligibility with an immigration lawyer or notary before proceeding.

What down payment must a non-resident provide?

Non-residents eligible to purchase must generally provide a down payment of at least 35% of the purchase price, although some lenders require 50%. Since CMHC, Sagen, or Canada Guaranty mortgage insurance is not available to non-residents, only conventional loans with a maximum loan-to-value ratio of 65% to 80% are accessible depending on the lender.

What are the tax implications for a non-resident property owner in Canada?

Non-resident owners are subject to Canadian tax on rental income (25% withholding on gross rent, with the option to file a Section 216 return), capital gains tax on sale (25% to 50% withholding depending on the province, with the obligation to obtain a clearance certificate), and potentially the Underused Housing Tax (1% of value annually) and applicable provincial speculation taxes.

Which banks offer mortgages to non-residents?

The number of lenders offering mortgages to non-residents has decreased in recent years. Some major Canadian banks maintain limited programs, often through their international banking divisions. Alternative lenders and private lenders also offer financing, generally at higher rates. A mortgage broker experienced with non-resident files is the best resource for identifying available options.

Does the Underused Housing Tax apply to all non-residents?

The fédéral Underused Housing Tax (UHT) of 1% applies annually to residential properties held by non-residents or non-citizens, unless the property is rented for at least 180 days per year to a tenant with a lease of at least one month each, or another exemption applies. Subject owners must file an annual return even if they are exempt from the tax.