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According to the Department of Immigration, Refugees, and Citizenship of Canada (IRCC), just over 437,000 new permanent residents arrived in the country in 2022. This exceeded the department's goal by a year, as well as the previous maximum of 405,000 reached in 2021.
Context. Immigration currently accounts for three-quarters of Canada's population growth. The federal government's immigration plan calls for the admission of an additional 1.45 million new permanent residents over the next three years, equivalent to 3.8% of the country's population.
The federal government has stated that immigration is crucial to the economy and that it accounts for up to 90% of Canada's workforce growth.
Problems. However, critics of the plan have raised questions about the impact of higher immigration targets on the country's already inaccessible urban housing markets. And it's unclear whether Ottawa's plan will help offset labor shortages in low-wage areas such as housing and hotels, catering, retail, and medical care.
The influx of new permanent residents is expected to bring new home buyers and renters to communities across the country. This may increase activity in the residential real estate market, which has slowed since the beginning of last year when the cost of borrowing jumped with rising interest rates.
Quote. "There is little debate that strong population growth goes hand in hand with strong real house price growth over time," said Douglas Porter, chief economist at the Bank of Montreal.
However, in his opinion, the influx of permanent residents will not immediately create a new pool of home buyers.
"Just as a large population increase last year failed to prevent a double—digit drop in house prices, another significant increase in 2023 will not keep house prices from falling heavily again this year," he said.
The typical house price across the country has decreased by 10% compared to February 2022, when the market reached its peak.
Mr. Porter expects that the influx of newcomers will change the situation in the rental market, where the cost of credit plays a smaller role. Rents have already risen sharply over the past year, and he believes that increased competition will push prices even higher.
Source: The Globe and Mail
Photo: Matthew Henry/Unsplash
