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Economic Viewpoint

The Ins and Outs of Immigration and Canada’s Housing Market

February 13, 2023
Randall Bartlett, Senior Director of Canadian Economics • Marc Desormeaux, Principal Economist

The Canadian housing market has corrected sharply from its pandemic highs. But looking ahead, we expect it to find a bottom by the end of the year. This is likely to be the result of falling interest rates, a tight labour market, elevated household savings and heightened immigration.

Naturally, an increase in immigration will spur sales activity. If these newcomers to Canada continue the recent trend of moving to Ontario and British Columbia, affordability there and nationally will erode further. However, if they move to places that have done a better job historically of integrating immigrants, such as the Prairie provinces, this will provide a substantive offset to the impact of higher immigration on home prices.

Increasing the housing supply beyond the typical demand response would also take pressure off prices but requires extraordinary policy intervention and resolve. Indeed, we estimate that housing starts would have to increase immediately by almost 50% nationally relative to our baseline scenario and stay there through 2024 to offset the price gains from the increase in federal immigration. This is equivalent to about 100,000 more housing starts on average annually in 2023 and 2024 relative to our baseline, and would lead to the highest level of housing starts in Canadian history.

Canada needs talented, young immigrants to increase productivity and offset the economic and fiscal drag from aging. Economic immigrants are more likely to be employed and have higher earnings than native born Canadians, thereby raising Canada’s economic potential. Turning them away because of an inability or unwillingness to build more housing would leave Canada worse off.

This note is part of ongoing work at Desjardins Economic Studies on the economic impacts of Canada’s shifting demographics.