Major players in British Columbia's housing sector are advocating for federal and provincial governments to relax restrictions on foreign investment in Canadian homes. They warn that without changes, the country's housing crisis could worsen significantly due to a potential crash in the construction industry.

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Call for Policy Adjustments

Leading figures within B.C.'s housing industry recently sent a letter to Prime Minister Mark Carney and federal Housing Minister Gregor Robertson, outlining their serious concerns. This letter, also sent to B.C. Premier David Eby, highlights a critical issue: if current policies remain unchanged, housing supply will continue its dramatic slowdown.

Current Market Conditions Show Severe Stress:

• British Columbia's benchmark home price declined to $959,300, down 2.3% year-over-year
• BC's average home price dropped to $954,065, down 4.4% annually
• Greater Vancouver's average home price fell to $1,273,462, down 5.7% year-over-year
• BC recorded only 7,162 sales in June 2025
• The province has 48,000 active listings

This slowdown is already impacted by high construction costs, expensive land, municipal fees, and inconsistent U.S. tariff policies. Consequently, housing prices are expected to rise further as supply constraints intensify.

Earlier this month, Minister Robertson indicated that his government was considering support measures for the residential development sector, acknowledging the industry's distress signals.

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The Role of Foreign Capital in Condo Development

The industry letter emphasizes that some level of foreign investment is crucial for providing the initial capital needed for condo projects. New condo developments typically require presales to meet financing thresholds. A portion of these presales traditionally relies on investor-focused buyers. Closer to project completion, sales usually shift towards owner-occupiers.

Critical Investment Statistics:

• Nearly 50% of Vancouver condos are not owner-occupied
• Almost 20% of detached single-family houses in Vancouver are not owner-occupied
• 31% of condos in Greater Vancouver are owned by investors
• Foreign investors represent between 2% and 6% of Canadian homeowners

The letter clarifies, "Without foreign investors, fewer projects will reach their presale financing goals. This will suppress the delivery of new housing supply, which benefits no one during a housing crisis, as projects simply won't begin."

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Current Restrictions and Economic Shifts

Over the past decade, as housing prices surged, B.C., Ontario, and other Canadian jurisdictions introduced taxes designed to deter foreign investment in real estate. The federal government implemented a ban on foreign housing investment in larger metropolitan areas in 2023, which has since been extended until 2027.

Policy Impact Measurements:

• British Columbians show 77% approval for the provincial foreign buyer tax
• 75% approve of the federal government's temporary foreign buyer ban
• 72% approve of the speculation and vacancy tax
• B.C.'s foreign buyer tax increased from 15% to 20%

However, a series of recent economic shifts have led to the most severe downturn in the Canadian residential development industry in decades. The letter suggests that future foreign investment in housing should be managed differently than in the past, with certain limitations.

"While we understand the ban was put in place to protect housing supply for Canadians, it has unfortunately affected the construction industry," the letter states.

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Construction Industry Crisis Deepens

National Construction Data Shows Alarming Trends:

• Actual housing starts increased 14% year-over-year with 23,282 units recorded in June 2025
• 96% of Calgary condos sold below asking price in Q1 2025
• Canada's national average home price reached $691,643 in June 2025

Industry experts point to a policy introduced in Australia earlier this year as a potential model. This policy restricts foreign investment in established homes but permits it for new builds and presales.

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Challenges for Residential Construction

While restrictions on foreign investment were initially well-received by voters concerned about rising housing prices and developers catering to foreign buyers, the current economic climate presents new challenges.

An executive vice-president at a long-standing Vancouver building company states that residential construction in major Canadian cities cannot function without access to capital from sources beyond Canadian citizens, companies, or pension funds. Individuals looking to buy are generally reluctant to tie up large sums of money for several years before a project is finished.

"Relying solely on the end-user to make a buying decision four or five years in advance is asking too much," the executive noted. This particular company, which typically undertakes five to eight rental and condo projects annually, did not start any new projects last year.

Vancouver Market Devastation:

• Major development firms implementing widespread layoffs
• Multiple projects paused indefinitely
• Several companies facing bankruptcy
• At least one condo project cancelled even after presales began
• Developers with financial capacity cutting prices dramatically

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Short-Term Rental Market Impact

Rental Investment Data Reveals Market Complexity:

• Vancouver: 4,000 short-term rentals with 87% occupancy
• Victoria: 1,100 short-term rentals with 88% occupancy
• Kelowna: 1,600 short-term rentals with 71% occupancy
• 19,000 entire homes available year-round on short-term rental platforms that are never owner-occupied

New B.C. regulations implemented on May 1st, 2024, limit short-term rentals to a property owner's principal residence plus one additional unit, expected to add 19,000 homes to the long-term rental market.

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Impact and Future Outlook

While this market turmoil offers some immediate relief for today's buyers through price reductions and incentives, industry professionals caution that the current trend will lead to a significant shortage of housing supply in the next two years, causing prices to rise again.

This downturn is considered more severe than what the industry experienced during the 2008 global financial crisis. At that time, construction activity sharply declined, but presale condo projects recovered within a year, partly due to continued foreign capital influx into the city.

Industry Association Response:

Chris Gardner, Chief Executive Officer of the 5,000-member Independent Contractors and Businesses Association, states that British Columbia's construction industry is facing significant devastation. Companies are halting projects due to uncertain costs and financing difficulties, issues that foreign investment could help alleviate.

"We have not seen builder layoffs like this in over a decade," Mr. Gardner remarked. "I believe government officials do not fully grasp the seriousness of this situation and how rapidly things are deteriorating."

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Mortgage Rate Environment Compounds Challenges

Current Mortgage Market Conditions:

• 5-year fixed mortgage rates average 4.43% as of July 25, 2025
• 5-year variable rates average 4.46%
• 1-year fixed rates average 5.47%
• Average rates have increased 7 basis points for 5-year fixed terms over the past 30 days

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A Balanced Approach to Investment

Both Mr. Gardner and many others in the development sector agree that if foreign investment is reintroduced, policymakers must learn from past mistakes. They seek to avoid a repeat of situations where large numbers of single-family homes and condos were purchased and left vacant.

"We understand what went wrong, and now we must implement it in a way that benefits British Columbians," Mr. Gardner emphasized. "We should be open to investment, but it should not be a free-for-all."

Government Policy Timeline:

• 2016: B.C. introduced 15% foreign buyer tax
• 2017: NDP increased tax to 20%
• 2023: Federal government banned foreign housing investment in larger metropolitan areas
• 2027: Current federal ban scheduled to expire
• 2024: B.C. introduced 20% tax on property sales within 365 days
• 2024: Short-term rental restrictions implemented May 1st

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Statistical Analysis of Foreign Investment Impact

While foreign investors represent a relatively small portion of Canadian homeowners, Statistics Canada estimates them to be between 2% and 6%, their concentrated investment in specific neighborhoods can have a disproportionate impact.

Regional Market Performance Comparison:

• Ontario benchmark price: $804,700 (down 6.9% annually)
• Quebec benchmark price: $529,300 (up 8.4% annually)
• Alberta benchmark price: $522,200 (up 0.7% annually)
• National benchmark price: $698,000 (down 4.5% annually)

A chief operating officer for a Toronto-based developer asserted that foreign investors are "paramount to our industry." If foreign investors are driven by economic motives, they should be permitted to acquire residential real estate in Canada, he added.

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Economic Fundamentals Signal Market Stress

Affordability Crisis Deepens:

• Homeownership costs in Vancouver were 97% of median household income
• Victoria ownership costs were 69% of median household income
• Homeownership costs considered unaffordable when exceeding 40% of household income

The data suggests B.C. home prices are significantly above sustainable levels according to long-term economic fundamentals, creating additional pressure for policy intervention.

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Recovery Dependent on Policy Changes

The construction industry's recovery appears increasingly dependent on government policy changes regarding foreign investment. With traditional financing sources insufficient for the scale of development needed, industry leaders argue that a measured reopening to international capital, similar to Australia's model, could provide the necessary funding while maintaining protections for domestic buyers.

The next few months will be critical as policymakers weigh public sentiment against industry necessity, with housing supply and affordability hanging in the balance.