Canada has taken the surprise decision to impose a two-year ban on overseas home purchases.
Canadian investors have purchased large tracts of farmland and irrigation water in Australia, particularly over the past four years.
There are restrictions, primarily from provincial governments, on foreign investors buying into Canadian agriculture.
Last week’s ban does not include farmland, but Canada’s sweeping bid to address its booming property market has many parallels with Australia.
According to CoreLogic, house prices across regional Australia are 24.3% higher than a year ago.
Last week’s budget announcement by Prime Minister Justin Trudeau’s government is aimed squarely at this country’s booming residential real estate market.
Like Australia, the Canadian housing market is setting price records, driven by low interest rates, low inventory and strong demand, particularly in the regions.
Critics of the government’s new housing policy say it is populist and likely to have little impact given that foreign ownership accounts for 3% of all owned properties.
In Australia, foreign ownership of residential property is at similar levels.
According to a NAB survey last year, the market share of foreign buyers in the new housing markets varies between 2 and 4%.
Victoria is the exception with foreign buyers involved in around 9% of property transactions.
Foreigners can buy investment property in Australia, but there are already restrictions on the type of property they can buy.
According to recent statistics from the Foreign Investment Review Board, most new foreign investment is for new housing and vacant land priced below $1 million.
China tops the list for foreign ownership of residential real estate, again at low levels.
When total foreign freehold and leasehold interests are combined, China holds the largest ownership of 2.3% of Australian farmland, behind the UK (2.2%), the US (0 .8%), the Netherlands 0.7% and Canada with 0.6%.
Nine out of 10 residential property sales to foreign interests are in Victoria, New South Wales and Queensland.
The Canadian government also imposes higher taxes on people who sell their homes within a year of buying them.
The ban will apply to condos, apartments and single-family residential units – permanent residents, students and foreign workers would be exempt, as well as foreigners buying a primary residence in Canada.
The Canadian budget also provided billions of dollars for new housing and measures to help Canadians trying to enter the market.
Australia’s federal and state governments are also promoting programs to help new buyers access home ownership in cities and regions.
MORE READING: Another record broken for farmland in the Wimmera.
There is mostly bipartisan support for a program that allows first-time home buyers to buy property with a 5 or 2 per cent down payment and avoid paying mortgage insurance from lenders.
To access the regional program, applicants must either build or purchase a newly built home and earn no more than $125,000 per year and $200,000 for couples. Home prices are capped between $800,000 and $350,000 depending on the state and location within the state.
Rental markets in Australia are also under pressure.
The lack of available housing has been identified as a key issue for regional areas trying to take advantage of the new popularity of the countryside relative to the city.
Tackling the shortage of rental properties must be a key policy of whoever wins the next federal election, according to Australian property investment professionals.
PIPA chair Nicola McDougall said political parties need to develop policies that increase the supply of rental properties across the country in the vein of the National Rental Affordability Scheme, which was scrapped after just a few years.
“With overseas migration set to soar over the next few years, where are these new Australians going to live if we don’t even have enough rental accommodation to house our current population?” said Ms. McDougall.
Don’t miss all the latest rural real estate news. Sign up here to receive our new free weekly Farmonline properties newsletter.
The story of foreigners banned from buying homes in Canada first appeared on Farm Online.