The Housing Market: When the Fog Clears – Benjamin Tal, CIBC
“There are a few lessons to be learned from recent developments in the housing market. First, markets are capable of responding swiftly to abnormal market conditions. Second, housing policy can notably impact the trajectory of the real estate market. And third, if those policies are not directed at the core issues facing the market, their impact will be temporary at best.
We are in the midst of an important transition period in the trajectory of the Canadian housing market in general, and Vancouver and Toronto in particular. The level of activity is likely to stabilize and perhaps soften in the coming quarters as markets adjust to recent and upcoming regulatory changes. But when the fog clears it will become evident that the long-term trajectory of the market will show even tighter conditions. The supply issues facing centres such as Toronto and Vancouver will worsen and demand is routinely understated. Short of a significant change in housing policies and preferences, there is nothing in the pipeline to alleviate the pressure.”
New Canadians Add to Canada’s Housing Boom – Scotiabank
- Immigration is a significant force in Canada’s housing market,
underpinning growing rental and homeownership demand, elevated new
construction, and ongoing urban population densification.
- As Millennials move past their prime household formation years beyond
the middle of the next decade, immigration is emerging as a key driver
of Canada’s medium- and longer-term housing outlook.
Immigration has become a major force in supporting the extended boom in Canada’s housing market. The number of new immigrants to Canada totaled almost 300,000 last year, up from an average of 260,000 over the prior decade, and registering the highest level in almost a century (chart 1). A similar number of arrivals is anticipated this year.
Immigration levels are set to move even higher. Ottawa recently announced an
increase in its annual immigration target from 300,000 this year to 310,000 in 2018, 330,000 in 2019, and 340,000 in 2020. The federal government’s Advisory Council on Economic Growth last year recommended boosting Canada’s annual immigration target to 450,000 by 2021 in order to address skilled labour shortages, increase international knowledge and networking, and assist with longer-term economic and fiscal challenges of an aging population. Ottawa, for now, is proceeding with a more modest, though still significant, version of the Advisory Council’s recommendation.
The number of non-permanent residents in Canada also has increased sharply.
Canada’s non-resident population has doubled over the past decade to almost
900,000 (chart 2). The net annual increase topped 100,000 in the twelve months to July. The surge has been fairly evenly split between more foreign workers and more international students.
This inflow too could rise further in coming years, as the federal government
moves to streamline foreign-worker application procedures, free trade agreements with labour mobility provisions such as CETA are implemented, and campuses continue to ramp up international recruitment efforts. Non-permanent residents are becoming a growing source of immigrants, with attendant Canadian work experience and/or post-secondary education. Roughly 20–30% of foreign workers and international students are transitioning to permanent resident status, usually within five to ten years of arrival, based on the latest available data.
As Millennials move past their prime household formation and home-buying years beyond the middle of the next decade, immigration could move from a key source to a dominant source of new household formation and housing demand. Net immigration accounted for about two-thirds of Canada’s population growth between 2011 and 2016. This share is expected to rise to 70% over the coming decade, and to 75% from 2026–2036.