Desperation Time
Happy Monday Morning!
We’re back after a two week hiatus and a lot has transpired during that time. As we have been detailing for quite some time, the development industry is in survival mode. Pre-sales are in the dumps, developers are sitting on a record number of unsold units, and prices continue to leak lower. Not a great set-up for PM Carney who promised 500,000 new homes per year.
It’s desperation time, cue the bazooka.
In an open letter dated July 29, 2025, and addressed to Prime Minister Mark Carney, and B.C. Premier David Eby, 26 prominent B.C. real estate firms called for immediate reforms to Canada’s national foreign homeownership ban and the B.C. government’s additional tax on non-resident buyers.
“Our direct request to government is simply this: the new home construction industry is vital to the BC economy, and the national foreign buyer ban and provincial foreign buyer tax need to be reconsidered, or modified along the lines of the Australian model.”
Australia requires foreign buyers to obtain Foreign Investment Review Board (FIRB) approval before purchasing residential property, and limits them to brand new, pre-sale, or vacant land (with a four-year build requirement). They are banned from purchasing existing homes.
In other words, lighten up the foreign buyer ban in Canada and allow foreigners to buy new condos. After all, they might be the only ones willing to pay todays prices.
Intuitively, for anyone in the industry, this makes sense. The funding model in Canada requires developers to pre-sell roughly 60% of the building in order to obtain construction financing. If we want more housing starts we need more capital.
Makes sense in theory, but the optics couldn’t be worse.
Trying to sell that to the public who was told for years that foreigners were a non-issue. A small part of the market. Skeptics were often labelled as racists, even by our own government.
It took the Trudeau government eight years to act, but they finally did. The ban went into place January 01, 2023 and was recently extended until 2027.
Will the Carney government reverse another Trudeau sin of the past?
If he does it will be political suicide.
Recent polling suggests broad support for the ban.
A Research Co. national poll (April 2025) found that 76% of Canadians support the federal ban on foreign purchases of residential property, with only 13% opposed and 11% undecided.
This support crosses party lines: 82% of Conservative, 78% of Liberal, and 78% of NDP voters back the ban.
I don’t see how Carney can remove or tweak the ban prematurely, prior to its natural expiration in 2027. Although pressure is mounting.
We just learned a major group of Ontario developers are following BC’s lead. Mattamy Homes, Minto Group, Great Gulf, Canderel and DiamondCorp are among the group of major developers urging Ottawa to allow foreigners to buy preconstruction condos and houses.
And it’s not hard to see why.
The Greater Toronto Hamilton Area (GTHA) new condominium apartment market produced just 502 sales in Q2-2025, continuing to break 30-year lows.
Unsold inventory across all stages of development totalled 24,045 units in Q2-2025. This occurred as developers continued to pause new condo launches. Urbanation says “cancellations are mounting, construction starts are collapsing, jobs are being lost, buyers are losing a lot of money, and developers are facing difficulties with closings.”
It’s a similar story in Greater Vancouver where unsold condos sitting on developer balance sheets continues to swell.
There are now 13,000 unsold new condos either available for pre-sale, or recently made available post construction.
Keep in mind that this inventory is typically not listed on the MLS for sale. This is effectively shadow inventory that doesn’t get talked about or published in official Real Estate Board stats.
Combine this with the 7 months of condo inventory for sale on the resale market and you start to see the magnitude of the problem. We have a glut of condos.
You don’t launch new projects if you can’t sell what you already got.
For this reason, we continue to believe housing starts will continue sinking lower, foreign buyer or not, and so too will tax revenues the government so desperately needs.
Will policy makers flinch or not? Tick Tock.
I am old enough to remember a time when condominiums were financed and completed without a presale requirement. As projects neared completion, developers set up a model suite and started selling. I share this since I blame lenders' presale requirements for many of the problems we are currently experiencing.
End-users, such as first time buyers, move-up buyers, and empty nesters did not want to buy three years (or more) in advance of completion. The only buyers were investors (both local and foreign), and what they generally wanted were smaller units that could be rented out. While the rents often did not cover the mortgage and related costs, there was an expectation that the units would increase in value, and they generally did. However, all this has changed.
So what's the answer to getting projects moving again? Rather than focus on removal of the ban on foreign buyers, I advocate for a ban on requiring presales! Yes, that's right. Developer and lenders should undertake more comprehensive market analysis and focus on building for 'end-users' who will buy nearer completion. But they don't want tiny studio, one and two-bedroom suites. They want something livable.
Is it not the idea that a lack of foreign buyers will help keep prices down? Even lower prices, as we may be seeing now?
Plan working.
Unfortunate for anyone who may have overpaid and borrowed short term (with generationally low interest rates at the same time), but there’s no guarantees in real estate, for buyers or sellers.
The best medicine for high prices is high prices. We don’t need help for foreigners to buy, we need help for Canadians. Lower prices ahead. Perhaps.