Canadian Real Estate Faces Immigration Shift From Tailwind To Headwind

Canada’s real estate market is facing a major change as immigration, once a strong support for housing demand, is now becoming a challenge. Immigration, which had been boosting the market by increasing the need for homes, is starting to have the opposite effect. This shift is largely due to new government policies aimed at easing pressure on housing, infrastructure, and services.

In recent years, high levels of immigration helped drive strong housing demand. Newcomers often need places to live right away, which fueled growth in both rental and ownership markets. This demand acted like a tailwind for the housing market, especially in big cities like Toronto and Vancouver. Home prices and rents surged as supply struggled to keep up.

Now, the federal government is pressing pause. Canada has decided to slow the pace of new permanent residents and cap the number of international students and temporary workers. The aim is to give the housing market and public services some breathing room. These changes are expected to reduce population growth significantly over the next few years, taking pressure off an overheated housing system.

The population grew by a record-breaking 1.3 million people in 2023. That growth pushed the country’s housing supply beyond its limits. But with these new policy changes, growth could slow to about 500,000 per year by 2026. That’s a huge drop, and it could lead to softer housing demand going forward. Fewer people arriving means less immediate need for housing, and that could bring prices down or at least keep them from rising quickly.

The shift also affects the rental market. With fewer international students and temporary workers, rental demand could cool. Landlords who once had their pick of eager renters may find it harder to fill units, especially in areas that saw a boom in rental construction. This could lead to a noticeable slowdown in rent growth, especially in major urban centers that had been most affected by the population surge.

While this shift may ease some of the affordability issues in the short term, long-term housing planning is still essential. Slowing population growth won’t fix the country’s deep housing shortages or construction delays. Canada still needs to build more homes, faster. The real estate market may be catching its breath now, but unless supply catches up, affordability will remain a major problem for years to come.