Canada Immigration Cuts Impacts on Housing Demand and Affordability
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Canada’s recent decision to slash immigration targets by over 900,000 across two years is expected to reduce housing demand, with population growth slowing by 0.4% by 2026 and resuming modestly in 2027. This shift could ease pressure on the housing market, including rentals, particularly in cities like Toronto and Vancouver. However, experts like RBC economist Robert Hogue caution that while this may address some immediate issues, it won’t resolve the deep-rooted affordability crisis, as the housing supply deficit remains significant.
The reduction in non-permanent residents is predicted to slow household formation by 46%, equating to nearly 400,000 fewer households over the next three years. This could provide an opportunity to narrow Canada’s housing gap, especially if homebuilding activity is sustained or increased. The rental market may experience relief with rising vacancy rates and stabilizing prices, while investor demand for residential properties might cool due to lower growth expectations for rental income.
Despite the immigration cuts, pent-up demand for homeownership persists, and anticipated interest rate reductions could reignite buyer activity. Lower borrowing costs and income growth may bring some affordability improvements, but challenges like high construction costs and a 545,000-unit housing supply shortfall since 2015 indicate that a full recovery will take years. Most affordability gains in the near term are likely to come from macroeconomic shifts rather than structural changes in the housing market.
Read the full article on: REAL ESTATE MAGAZINE
