Canada’s failure to meet its immigration targets due to the pandemic is offering some relief in terms of rent affordability. But it won’t negatively impact the Canadian detached housing market — at least in the near term, say real estate experts and economists.
As Ottawa prepares to announce its new immigration targets in the coming days, real estate company Royal LePage released a statement on Thursday urging the government to continue pro-immigration policies
“Sustained and robust immigration levels are vital for the Canadian economy and the long-term health of the real estate market,” it said.
CEO Phil Soper said his company’s statement comes as its website shows a spike in searches from other countries, particularly the U.S. where there has been a huge bump in interest among non-permanent residents there in coming to Canada.
“I see a correlation between that and the fact that (in a 2019 Royal LePage) study, 75 per cent (of newcomers) did not even consider the U.S. as an alternative when they came to Canada,” he said.
“We believe that immigration, particularly economic immigration — highly skilled people and people with capital, who can start businesses — is key to our growth and the U.S. believes that it’s not,” he said.
“No place has benefited more than the GTA from targeted skill-based immigration,” said Soper, citing the fields of technology, math, science and research.
The Toronto Star’s Nicholas Keung reports that only about 60 per cent of the 341,000 immigrants it had targeted are expected to arrive in Canada this year.
In the short-term, however, that won’t impact housing sales, said Soper. His company’s research showed that newcomers don’t purchase a home until they’ve been in the country an average of three years. That means people who are going to buy this year and next are already in Canada.
But if the shortfall continues on a prolonged basis, it could ripple into the single-family home market down the road, he said.
A sustained, dramatic drop in immigration, “would have dire consequences on Canada’s largest industrial segment, which is commercial and residential real estate,” said Soper.
In Regina, 45 per cent of housing transactions last year were newcomers who had been here less than a decade, said Soper.
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The Canadian Real Estate Association notes that the housing market has been buoyant since the early COVID-19 lockdown ended, due to a lack of supply “in almost every market in the country.”
“Reduced demand from international immigration is certainly not holding the market back in any way,” it said in a statement.
“The four highest years on record for net immigration were 2016-2019, so we are starting from a place where population growth has been very high,” said the association. “Low international immigration does have the potential to decrease demand if it persists over the long run.”
A lot of the immigration decline has been in non-permanent residents, including students, who tend not to be home buyers, said BMO senior economist Robert Kavcic. Their absence, however, impacts condos and multi-unit family rentals.
“You’re seeing less demand for downtown urban living to begin with, but because that population growth has fallen off, you’re seeing vacancies and you’re seeing downward pressure on rent,” he said.
It might not make the downtown significantly more affordable but, Kavcic said, “It’s a break from what we were experiencing … rent growth that was two or three times the rate of inflation and probably outstripping wage growth by a great big margin.”
The trend that actually began pre-COVID could put the condo market in line for a correction as investor owners of condos struggle to cover their costs or see the growth expectations realized, he said.
Whatever immigration targets the government sets, it is still up against the uncertainties of the pandemic and the longer it goes on, the more it drags on those vulnerable sectors, said Kavcic.
“The core of Toronto over the longer term is probably going to drive economic growth and drive the housing market, but that segment of the market is the one unfortunately hit by the circumstance right now,” he said.
Last year, a Royal LePage study found that newcomers were expected to account for one in five home purchases in the next five years. Half of the immigrants surveyed purchased a detached house and 18 per cent bought a condo.
About 46 per cent of immigrants to Canada come to Ontario, where 29 per cent become homeowners. Newcomers were expected to purchase 286,000 homes within five years, according to the study.
Tess Kalinowski is a Toronto-based reporter covering real estate for the Star. Follow her on Twitter: @tesskalinowski
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