A ban on the purchase of residential property by foreigners in Canada came into force on January 1, aiming to provide more housing to local residents facing a housing crisis.

Several exceptions in the law allow individuals such as refugees and non-citizen permanent residents to buy homes.

In late December, Ottawa also specified that the ban would only apply to urban housing, but not to recreational properties such as summer cottages.

The temporary two-year measure was proposed by Prime Minister Justin Trudeau during the 2021 election campaign when skyrocketing prices put home ownership out of reach for many Canadians.

"The desirability of Canadian housing attracts speculators, wealthy corporations and foreign investors," his Liberal Party said in its campaign plan at the time.

"This leads to a real problem of underutilized and vacant housing, rampant speculation and skyrocketing prices. Housing is for people, not investors," Trudeau said.

After winning the 2021 election, the Liberals quietly introduced the Ban on Non-Canadians Buying Residential Property Act.

Major markets such as Vancouver and Toronto have also introduced taxes on non-residential properties and vacant homes.

Despite the recent boom, the country's real estate market cooled for sellers as mortgage rates followed the Bank of Canada's aggressive monetary policy in an effort to curb inflation.

Median home prices fell from a peak of more than C$800,000 (US$590,000) in early 2022 to just over C$630,000 (US$465,000) last month, according to the Canadian Real Estate Association. . Many experts said the ban on foreign buyers - who according to the national statistics agency account for less than five per cent of homeownership in Canada - would not have the desired effect of making housing more affordable.

Rather, they point to the need for more housing to meet demand.

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