When the coronavirus pandemic effectively shut down the border, immigration came to a halt. Now that conditions have normalized, the federal government is reopening the border and moving ahead with its plan to welcome more than a million newcomers over the next couple of years.
The initiative is already entirely in motion as thousands of migrants are arriving in Canada daily. During the first quarter of 2023, Canada’s population increased by 292,232, according to Statistics Canada. Last year, more than 431,000 permanent residents were welcomed into the country, representing the largest influx of newcomers in Canadian history. The previous record was in 2021 when approximately 401,000 new permanent residents were admitted into the country.
Today, Canada has nearly eight times the number of permanent residents each year than the United Kingdom and four times more than the United States. Canada is the fastest-growing country in the Group of Seven, and it is projected that if Canada continues on this path of record-breaking immigration, its population could double within the next 30 years.
Based on Ottawa’s immigration strategy, this number will continue to climb in the coming years as immigration has turned into a critical factor in maintaining Canada’s economy, social safety nets, and population trends. Canada is forecast to have 1.45 million new permanent residents in the next three years alone.
But will this produce a boom for the country?
Supply and Demand Fears
Critics have warned that this development will have a significant impact on the Canadian real estate market. Housing inventories have been below-trend, housing starts have trended downward, and the number of prospective homebuyers has increased. This type of climate will create more competition for the current crop of buyers.
In other words, there will be a larger pool of buyers and even renters competing for limited residential properties.
Banks, policymakers, and academics have all been cautioning the federal government that this rapid growth in population could make housing costs worse, and the Canadian real estate market may not be able to build housing that is equivalent to the increase in population. However, the government is committed to bringing more people into the country as it firmly believes high immigration is needed to support the national economy.
Ultimately, Canada will need new housing to manage the surge in immigration. As a result, industry experts assert that investors should see opportunities for new rentals and multi-family home builds.
TD economists estimate that Canada could fall short of fulfilling housing demand by approximately 215,000 units from 2023 to 2025. If the country’s population continues to grow at current rates, this supply-demand gap could increase beyond 500,000 units. It is obvious that the housing supply is likely to struggle to keep pace with Canada’s record-breaking immigration policies. This supply-demand gap opens significant prospects for real estate investors and property owners. Most newcomers coming to Canada are educated, young, and well-financed. These are all positive attributes for the real estate market, as economic immigrants could create new businesses and investments.
Put simply, the immigration efforts could prove to be a boon for newcomers with the resources and capital to start businesses, lease units, and engage in the broader commercial real estate market.
Big Cities vs. Small Towns
Toronto has been one of the most popular destinations for immigrants, with nearly 115,775 new permanent residents making this city their home in 2022. This was followed by Montreal, with 45,000 new arrivals. Vancouver ranked third by accounting for 44,295. It is important to note that many small cities in Canada are experiencing a boom because of new immigrants, too. Strong growth has been reported in a wide range of places: Moncton, New Brunswick; Halifax, Nova Scotia; Victoria, British Columbia; Waterloo, Ontario; London, Ontario; and Nanaimo, British Columbia.
Indeed, the effects of immigration are not confined to the major urban centres. The numbers suggest that demand for commercial real estate is occurring in big and small cities across the country.
Within these municipalities, there is a struggle between supply (homes, rentals, and warehouses) and demand.
Demand for apartment buildings will continue to grow as these immigrants need a place to live, while demand for products is also likely to jump, resulting in an increase in demand for industrial warehouses from large retailers and grocery stores. It is expected that many new immigrants may not have enough cash or savings to buy homes, but rental demand should definitely go up. However, these new immigrants will likely enter the homeownership cycle in two or three years. Many could also choose to invest in commercial real estate once they have settled in their new country.
Alberta, considered to be Canada’s last affordable housing market, is seeing significant popularity among new immigrants. There has been a growth in demand for warehouse leasing and apartments in Alberta, and as immigration continues, this province could be a hub for commercial real estate opportunities.
Labour, Bans, and Optimism
The federal government has purported that immigration could potentially be a solution to the housing crunch as more immigrants mean more labourers, which could help the construction industry address its shortage. The construction business currently has about one million jobs sitting vacant throughout Canada. People coming in could contribute to the construction of new residential properties and help alleviate the housing affordability crisis.
According to BuildForce Canada, the Canadian construction industry will need about 1.2 million workers by 2027.
The government is confident that the market should balance out with people coming in and helping build the houses, which will eventually be occupied by new immigrants and those who made these units.
Earlier this year, Ottawa installed a two-year ban on non-Canadians buying homes. This strategy is designed to keep housing prices from rising too high to make the real estate market fairer for Canadians and to ensure that houses are being used as homes for Canadian families instead of financial assets for temporary residents.
While there are concerns about what could happen over the next several years, many observers believe that the boom in new arrivals could have a positive impact on Canada’s real estate market as long as the housing inventory crisis is handled smartly and efficiently at all three levels of government.