For the last 40 years, immigration has played an integral role in the Canadian real estate market. Over the last decade, newcomers have become important factors in many of the country’s major housing markets, from Vancouver to Ottawa to Toronto to Montreal. But immigration became another casualty of the coronavirus pandemic in 2020 as the free movement of people became restricted around the world. It remains unknown when immigration rules will be relaxed, but with the resurgence of confirmed COVID-19 cases worldwide, these regulations may be in effect for a prolonged period.
According to the latest Refugees and Citizenship Canada (IRCC) data, a little more than 19,000 new permanent residents arrived in Canada in June. This is down 44.2 per cent from the same time a year ago. Year-to-date, about 103,000 people have been admitted into Canada, which is also down approximately one-third from 2019. The top destinations for newcomers have reported double-digit declines:
- British Columbia: 20.7 per cent
- Ontario: 41.8 per cent
- Quebec: 64.7 per cent
Not surprisingly, this is impacting the Canadian real estate market as hundreds of thousands of people are not contributing to overall housing demand.
Is Immigration Impacting the Largest Canadian Real Estate Markets?
“COVID-19 changed everything.” That is the conclusion from the newest Statistics Canada study assessing the Canadian real estate industry before the coronavirus outbreak, and in the months during the pandemic. Researchers found that demand had outpaced supply in a lot of the critical cities until the middle of March, caused mainly by economic growth, a robust labour market, and a population boost from immigration.
In addition to a plunging economy and surging unemployment, immigration came to a screeching halt. This triggered an average of a 70 per cent drop in housing sales from March to April. But while industries are rebounding in the post-lockdown economy, some housing markets may fare better or worse than their counterparts in the months ahead.
Montreal, for example, is a critical immigration centre in the country. This contributed to the city’s stellar price growth in the pre-pandemic marketplace, and StatsCan believes this will continue because it maintains sufficient housing demand to support upward price movements.
Ottawa had one of the hottest housing markets in the country before the public health crisis. Despite a modest slowdown, the sector was still resilient due to its high proportion of government workers and technology sector employees. Ottawa also maintains one of the highest population growth rates nationwide. So, the nation’s capital does attract a lot of newcomers, but its fundamentals are keeping the Ottawa real estate market booming.
Toronto and the GTA appear immune to the economic fallout from COVID-19. Greater Toronto welcomes approximately 100,000 immigrants each year on average, however immigration has fallen 69.6 per cent as a result of coronavirus-related restrictions. Despite this drop, there is currently enough demand for houses and condominiums that prices and sales activity have popped during the recovery, indicating that this market too, will continue to flourish. In a recent report, RE/MAX anticipates Toronto housing prices will rise by five per cent through the remainder of 2020. If home sale volumes are not affected by suppressed immigration, could we possibly witness impacts in other areas of these urban markets?
Will Less Immigration Create New Trends?
In recent months, the real estate industry has seen a few new trends develop across the country.
The most significant change, especially in a major urban centre like Toronto, has been the rental market. Rental prices have come down as property owners attempt to secure new tenants from a pool of prospective renters. Indeed, studies have found that newcomers typically buy a home three years after coming to Canada. In the meantime, they rent, but with fewer immigrants, there is less competition for apartments and condo units.
With travel restrictions still in place, short-term rental investors have lost an important source of income. Condo owners are either dumping their properties or turning their suites into long-term rentals. Even without rising immigration, there has been an increase in construction for apartment buildings.
While reduced immigration levels will inevitably translate to fewer entrants within local markets, for cities that already have an enormous amount of competition for the limited supply of housing (such as Toronto and Vancouver), the impact will hardly be felt. The current conditions are proving that bidding wars, blind auctions, and bully bids will persist, with or without normal immigration levels.
Despite the doom and gloom prognostications at the start of the pandemic, the housing sector is recovering faster than what the experts had anticipated. The industry may close 2020 in positive territory, thanks to accommodative monetary policy and a government employing various stimulus measures to support the national economy. While declining migration may be the new norm for the foreseeable future as nations worldwide attempt to contain this pandemic, Canada’s major urban real estate markets have shown great resilience despite this reduced demand.
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