Canada's foreign buyer restrictions are getting an important update. In its November 2026 federal budget announcement, Ottawa confirmed its intention to extend the Prohibition on the Purchase of Residential Property by Non-Canadians Act until January 1, 2029, while exempting newly constructed residential properties.
The announcement introduces a notable distinction between buying an existing home and purchasing a newly built one. For Toronto, where the condominium development market has faced slower sales and reduced investor activity, the change could have meaningful implications.
But the federal policy is only part of the picture. Foreign buyers considering property in Ontario may also face a provincial speculation tax, as well as an additional municipal tax in Toronto.
Here's what buyers and sellers should know.
A Different Approach to Existing Homes and New Construction
First introduced in 2023, Canada's foreign buyer ban restricts certain non-Canadians from purchasing residential property across the country. Originally scheduled to expire in January 2027, the restrictions are now set to continue until January 1, 2029, under the government's latest announcement.
The proposed change maintains restrictions on existing residential properties, including resale houses and condominiums, while creating an exemption for newly constructed homes.
For Toronto's real estate market, this distinction is particularly relevant. The city has a significant pipeline of condominium developments, and many projects depend on pre-construction sales to support financing and move forward with construction.
Opening qualifying new properties to a wider pool of international buyers could provide developers with another source of demand, while potentially improving access to newly built inventory.
The exact scope of the exemption, including how it will apply to pre-construction purchases and completed but unsold developer inventory, will depend on the final legislative and regulatory details.
The Additional Cost Foreign Buyers Need to Understand
Even with the proposed federal exemption for new construction, purchasing property in Ontario can come with substantial additional costs for certain foreign buyers.
Ontario's Non-Resident Speculation Tax (NRST) currently adds 25% to the purchase price of qualifying residential properties. It generally applies to foreign nationals who are neither Canadian citizens nor permanent residents, as well as certain foreign corporations and taxable trustees.
The tax applies across Ontario, including Toronto and the GTA, and covers a range of residential property types, from detached homes and townhouses to condominium units.
Toronto buyers also face a separate municipal measure. Since January 2025, the City of Toronto has applied its own 10% Municipal Non-Resident Speculation Tax (MNRST) to certain qualifying purchases.
Where both taxes apply, the combined speculation tax is 35% of the purchase price, before regular provincial and municipal land transfer taxes.
It's important to understand that these taxes operate independently of the federal foreign buyer restrictions. Being eligible to purchase a newly constructed property under the federal rules does not automatically exempt a buyer from Ontario's or Toronto's speculation taxes.
Some exemptions and rebates are available under specific circumstances, including for certain Ontario Immigrant Nominee Program nominees and protected persons. Eligibility depends on the buyer's individual situation and should be confirmed before a transaction.
What Could This Mean for a Toronto Property Purchase?
The financial impact can be significant.
Consider a qualifying condominium purchased in Toronto for $2 million. If the buyer is subject to both the provincial and municipal speculation taxes, the two charges alone would amount to $700,000.
Regular land transfer taxes would apply as well. At this purchase price, Ontario Land Transfer Tax and Toronto Municipal Land Transfer Tax would add approximately $36,475 each.
That brings the combined speculation and land transfer taxes to approximately $772,950, before legal fees and other closing costs.
This is an illustrative example based on a purchase within the City of Toronto, assuming no applicable exemptions or rebates. Actual costs will depend on the property, purchaser and transaction.
What to Watch in Toronto's Real Estate Market
The federal announcement could create new opportunities for the pre-construction sector by allowing eligible international buyers to participate in the market for newly built residential properties.
For developers, this may mean access to a broader buyer pool. For purchasers, it could create additional options when considering new developments and newly completed homes.
However, the impact will depend on how the policy is implemented, which properties qualify and how buyers respond. The distinction between federal purchase restrictions and provincial and municipal taxes will also remain important.
For anyone considering a real estate purchase in Toronto, understanding the rules before making a decision is essential. The type of property, the buyer's residency and eligibility status, and the location of the home can all affect what is permitted and what taxes may apply.
Looking Ahead
Canada's decision to extend its foreign buyer restrictions while making room for investment in newly constructed housing marks an important development for the country's real estate market.
In Toronto, the potential effects on condominium development, pre-construction sales and new housing inventory will be worth watching. At the same time, the existing provincial and municipal tax measures mean that the cost of purchasing property can vary considerably depending on the buyer's circumstances.
At P&C Associates, we continue to follow the developments shaping Toronto's real estate market and what they could mean for buyers and sellers.
