CANADA – QUEBEC Trends and Developments Contributed by: Eleonora Eusepi, Alain Castonguay, Joseph Piazza and Alessia Talarico, BCF LLP
The Real Estate Market in the Province of Quebec, Canada Introduction Canada’s real estate market in 2024 and early 2025 has been shaped by an unprecedented convergence of policy shifts, legislative reforms and socio-economic pressures. At the federal and provincial levels, sweeping fiscal and reg - ulatory changes – ranging from proposed tax reforms to competition law amendments – have contributed to both heightened uncertainty and fundamental recalibrations in investor behaviour. Meanwhile, the intensifying housing crisis, which is particularly acute in urban centres like Montre - al, has amplified the urgency for structural solu - tions and sustainable development practices. Although the effects of the recent shift in the geopolitical sphere caused by the changes in the United States’ economic policies have yet to be felt on the Canadian real estate market, the first months of 2025 have also been characterised by economic uncertainty. Four key developments are at the forefront of this shifting landscape in the province of Que - bec. • First, the proposed increase in the capital gains inclusion rate created a ripple effect in investment decisions, prompting a wave of asset sales, project delays and market volatil - ity before its eventual cancellation in March 2025. • Second, substantial amendments to the Competition Act (R.S.C., 1985, c. C-34) introduced new constraints and compliance requirements that directly impact the structur - ing of real estate transactions, particularly in relation to restrictive covenants, exclusivity clauses and merger oversight. • Third, ongoing efforts to confront the housing crisis through federal legislation prohibiting
the purchase of certain properties by non- Canadians through municipal regulation and incentives have triggered intense debate about the effectiveness of current policies and the role of private developers in deliver - ing affordable and social housing. • Lastly, the government has extended the period during which non-Canadians are not allowed to purchase certain types of residen - tial properties until 1 January 2027. Together, these developments reflect a broader transformation of the Quebec real estate envi - ronment, in which policy clarity, regulatory com - pliance and social responsibility are becoming as critical to market participants as profitability and growth. The following sections examine each of these trends in detail, offering insight into their implications for developers, investors and other stakeholders operating in today’s evolving Que - bec real estate market. Increase in the capital gains inclusion rate on eligible investments In Canada, capital gains taxes apply when indi - viduals or corporations sell eligible investments – assets acquired with the intention of generating income or appreciating in value. This includes real estate held for investment purposes. On 16 April 2024, the federal government released its budget for the year, introducing key changes to capital gains taxation. One of the standout proposals was raising the capital gains inclusion rate from 50% to 66.67%. This increased rate would apply to annual capital gains surpassing CAD250,000 for individuals, and also to all capital gains generated by corpo - rations and the majority of trusts. The implemen - tation of this change was planned for mid-year, starting 25 June 2024.
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