Canada ban on foreign home buyers will halt capital flight, say experts
Experts have described the recent two-year ban by Canadian government on foreigners from buying homes as a good development that will halt capital flight from Nigeria’s real estate sector.
Canada’s Prime Minister, Justine Trudeau, had on January 1, 2023 announced a new law that effectively prohibits foreign buyers from investing in residential properties for two years as an attempt to cool off a skyrocketing real estate market.
Essentially, the new policy aimed to make more homes available to locals facing a housing crunch. The law was enacted as a result of the rise in Canada’s home prices since the pandemic, although permanent residents will be exempted. Some politicians believe that foreign investors are to blame for this because they are buying up available homes as investments.
Trudeau had said the desirability of Canadian homes is attracting profiteers, wealthy corporations and foreign investors, leading to a real problem of underused and vacant housing, rampant speculation, and skyrocketing prices, adding that homes are for people, not investors.
Nigerian immigration to Canada has become popular in recent years, accounting for one of the main source countries of Canada’s immigrant population with over 50,000 Nigerians in that country. Statistics also revealed that over 15,000 Nigerians immigrated to Canada in 2021.
Besides those who intend to move to Canada, the real estate association has expressed concern about the law for foreigners already living there, warning that the ban on the purchase of residential property may reduce Canada’s reputation as a multi-cultural country that welcomes immigrants from all over the world, especially Nigerians.
Reacting to the development, President, lnternational Real Estate Federation (FIABCI), Nigeria Chapter, Mr. Gladstone Opara, said Nigerians who are now resident in Canada and those whose children, instead of renting accommodation, would prefer to buy homes for them will be affected by the law. Although, he said the percentage of effect will be minimal.
He added that Nigerians and other foreigners could still invest in commercial real estate but not residential buildings. He said: “It is only those who haven’t explored the real potential in property development in Nigeria that can be thinking of going to invest in residential property in Canada. Markets like Canada, United States and the United Kingdom have existed for years and those who have explored it have found out that you can’t compare the return on investment in those areas with Nigeria.
There are some developers who can still make between 10 to 20 per cent return on investment in property development, especially those who are investing their money in places like Lagos and Abuja, outside those who are borrowing. Why Nigeria’s property development has remained in a low state is because of issues of funding, many people have the idea but credit facilities are not available and if available, the interest rate is too high. It is a good thing for Nigeria, as unnecessary capital flight will reduce. The money that will go will be invested in our real estate sector.”
Opara stated that Nigeria still has a lot of foreign investors coming into real estate sector in locations like Eko Atlantic City, Lagos, Abuja and Port Harcourt despite the volatile environment.
“If we have a level playing ground to operate, Nigerians will not be thinking of going to any other place to buy property because the market is available, the population and the huge housing deficit. Investing outside this country is a miscalculation. To lend credence to my argument, let’s look at some statistics on return on investment in some real estate developments in Lagos.
“In Elegushi, Lagos, a plot of 1,000 square metres sold for less than N10 million in 2012. It sells for as high as N200 million today. 500 square metres in Periwinkle Estate, Lekki sold for N50 million in 2016. It sells for as high as N200 million presently.
“Five bedroom-detached house on 1,000 square metre in Ikoyi sold for N300 million in 2015. The price today is about N1.2 billion. You can hardly find these same rates of return in any part of the world, including Canada,” he said.
The Principal Partner, Kola Akomolede and Company, Chief Kola Akomolede, said the new law would affect Nigeria positively as those who had planned to invest in Canada may decide to invest their money in Nigeria.
Akomolede who was the vice president, Africa Chapter, lnternational Real Estate Federation said: “The decision may increase the inflow of foreign-exchange from Canada to Nigeria. On the other hand, it may discourage some people from flocking into Canada as before but that may not be too serious because most of the people going to Canada are not going there for property investment but to seek a better place than Nigeria.”
“Significantly, it will affect the prices of property in Canada and reduce the demand for property. If property prices are rising in Canada, it means the economy is booming but there could be some other socio-economic reasons for the government to make such a law.”