Ottawa

CANADA will ban most foreigners from buying homes for two years and provide billions of dollars to spur construction activity in an attempt to cool off a surging real-estate market. The measures will be contained in Finance Minister Chrystia Freeland's budget on Thursday (Apr 7), according to a source familiar with the matter.

The move signals that Prime Minister Justin Trudeau is becoming more assertive about taming one of the developed world's most expensive housing markets.

Home prices in Canada have soared more than 50 per cent over the past two years. The market saw a record monthly increase in February as buyers acted ahead of rate increases by the Bank of Canada, taking the benchmark price of a home to C$869,300 (S$942,000).

The foreign-buyer ban won't apply to students, foreign workers or foreign citizens who are permanent residents of Canada, the source said.

"I don't think prices are going to fall as a result, though I do think it takes away at least some of the competition in what is the most competitive market in Canadian housing history," Simeon Papailias, founder of real estate investment firm REC Canada. "I don't think a two-year band-aid is going to have an impact on what's a fundamental lack of supply."

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Several billion dollars in Freeland's budget will be allocated to building affordable housing and to helping local governments update their systems to allow faster construction of new properties. Yet the government plans other measures that could potentially boost demand. Freeland will introduce legislation that allows Canadians under the age of 40 to save as much as C$40,000 for a home downpayment within a new tax-exempt vehicle, the source said. BLOOMBERG