The air is coming out of the Canadian housing bubble.

CTV reports that tomorrow's Canadian federal budget will include a provision that bans foreigners from buying Canadian housing for two years. It will apply to condos, apartments, and single residential units.

The timing is a classic case of closing the barn door after the horses have left. The latest Toronto housing data showed a quick cooling of the market in March as interest rates rose.

Toronto home prices cooling

I was on BNNBloomberg last month saying that we were finally at the moment where the Canadian housing bubble was about to burst and this certainly adds to my conviction.

The question now is whether it will be a soft or hard landing. These measures from the Federal government are being combined with provincial measures and BOC hikes to create a perfect storm in a market that was already way out of line.

Even with this fresh declines, Toronto prices are up 18% y/y and the median price of a detached home is $1.6m.

As for the broader picture around the Canadian budget, it will be a complicated one but with windfall taxes reportedly coming for Canadian banks and measures like this, risks for the Canadian dollar are negative.