Work Permit Iranians and Buying a Home in Canada: Should You Invest in Pre-Construction?

If you are one of the many Iranians now living in Canada on a work permit, this one is for you. The question I get asked again and again is simple: after you get your work permit, is it a good idea to sign up for a pre-construction project, or not? A lot of people reason that by the time the building is finished in three or four years and the keys are handed over, they will already be a permanent resident, so why not start now and lock in a unit?

I'm Moe Asgarian, a senior real estate broker in Toronto. In this article I want to open up this question and talk honestly about investing in the housing market while you are on a work permit. Let's go through it the way I would on a call with you.

How thousands of Iranians ended up with an open work permit

This was a program Canada's immigration department announced after the events and protests in Iran. It said that an Iranian person who was in Canada on a visitor visa could apply for a work permit or a study permit. So if you had a tourist visa and you were on Canadian soil, you could apply, and after some time the immigration department would grant you an open work permit or a study permit.

What actually happened is that thousands of Iranians used this opportunity. Some got a tourist visa for the first time and came over, others already had one, and now they hold an open work permit. So the real question becomes: can these people buy a home?

Can you legally buy on a work permit?

The answer is yes. Legally, because you hold a work permit, you can buy a home. Even though Mr. Trudeau's government extended the foreign buyer ban to 2027, people who hold a work permit, along with a few other conditions I have explained in earlier videos, can legally go ahead and buy.

But here is what you need to know. In the province of Ontario there is another rule for foreign buyers: if you are a foreign buyer holding a work permit, you have to pay a 25% Non-Resident Speculation Tax. And you pay that money when you are transferring the title, at what we call closing. So as a work permit holder you can buy in Ontario, or do a pre-construction purchase, as long as you understand that 25% bill.

Why the pre-construction dream needs a closer look

Some people think it through like this: now that I have my work permit and I'm chasing PR, why not use this chance, plug myself into the real estate market, and buy a pre-construction unit. By the time it's ready in four or five years and I have to close, hopefully I'll have my PR and everything is lined up. At first glance it sounds very attractive. You put down a small percentage today, you pay in small installments, and you're told your home will be ready in three, four, five years. You tell yourself, what could be better?

The reality is that this varies from person to person, and you have to look at it with much more care and detail. Why? Because some people on a work permit might not reach permanent residency by the time that project is delivered in three or four years. That risk is real.

The assignment escape hatch is not so simple

A lot of people tell me, worst case, if we can't get our PR, we'll just assign the condo, meaning we transfer the ownership rights of our unit to someone else for a profit. The truth is that assigning is not as easy as you think. Even if you manage to do the assignment, it can happen at a loss. And if there is a profit on that assignment, that profit is taxed one hundred percent. What I mean is, you need to make this decision very precisely and with enough knowledge. Pre-construction is honestly its own separate product, and you have to weigh many factors before investing in the pre-con market.

My advice: settle your status first

So what do I recommend? Before you look into anything about buying in the Toronto housing market, focus on getting settled faster, finding work faster, and ultimately getting your permanent residency faster. Why? Because, God forbid, if for various reasons such as Canada's economy or the job market you can't find suitable work that leads to PR, you have a problem. On top of that, next year Canada holds its federal election, and if the Conservatives win, immigration policy could change too. Then what happens? You have a pre-construction project, but when the deadline arrives you haven't managed to get your PR to sign the title without paying that tax. That situation can get very complicated.

I have explained in other videos on this channel that the Toronto housing and condo market is a long-term market. Looking at the numbers and charts, this is completely clear. So don't worry about one or two years. It usually isn't the case that in a single year you suddenly lose a huge amount of gain by not buying a condo. Right now interest rates are high, the market is calm, and condos in general saw small price changes in 2024. Also keep in mind that buying pre-construction is the more expensive option: a ready-to-move condo can be roughly 15 to 20 percent cheaper than a unit in a pre-construction project.

When pre-construction can still make sense

As I said, this is person by person. Let me give you an example. There are people who came on an open work permit and truly believe Toronto's real estate market, especially in pre-construction and condos, has a very bright future, and they hope a Conservative government gives housing a strong jump. These people also have the financial ability to pay that extra 25% tax at closing, and they're betting that within four or five years after closing they'll reach PR and get that money rebated back to them. Those buyers can go into pre-construction projects, because financially they can carry the investment, even with a higher down payment percentage.

For most people who just got an open work permit and are here in Canada, I do not recommend chasing pre-construction projects. Instead, get your work and permanent residency sorted out faster, and buy after you have your PR. If you are on a work permit in Canada and have more questions about Toronto's housing market, my colleagues at Team Asgarian and I can help. We are always studying the market and can help you understand it better so you make the right decision for yourself and your family. If you'd like a straight answer for your own situation, fill out the form below and book a free consultation. Stay well and take care.