Immigration the wild card in new home forecasts
July 27, 2020
Immigration to Canada could be the wild card in future housing sales and starts, analysts say.
Canada is currently seeing a huge drop in immigration, which some say could hammer the housing market. Others argue that immigration levels are poised to increase because of stricter U.S. visa requirements and the fact that Canada is seen as being successful in combating the COVID-19 pandemic.
The stakes for the housing industry are huge.
A 2019 survey commissioned by Royal LePage found that newcomers to Canada represented one in every five (21 per cent) homebuyers in 2018.
“If the current international migration level is maintained, Canadian newcomers are expected to purchase 680,000 homes over the next five years. In 2018, international migration accounted for 80.5 per cent of Canada's population growth according to Statistics Canada,” the survey noted at the time.
But a report this year from U.K.-based Capital Economics warns that, due to a recent crash in immigration levels, Canada’s house sales and prices are set to fall and stay down for years.
Because of travel restrictions related to the global pandemic, the number of immigrants is down by 85 per cent so far this year and 500,000 international students won’t be coming to Canada in 2020, noted Benjamin Tal, managing director and deputy chief economist at CIBC World Markets.
Tal told a Canadian Real Estate Forum webinar July 13 that, if the immigration trend continues, rental and new home demand could flatten in the second half of this year.
This would mean, he suggests, housing starts falling from the current pace of close to 200,000 per year to the 150,000 range.
However, political upheaval in Hong Kong and more strict U.S. visa requirements could boost immigration levels.
A report in the South China Morning Post in July 2020 noted there has been a near six-fold increase in Hong Kong residents inquiring about exiting due to what are seen as harsh new Chinese government controls.
Britain has announced it will streamline immigration applications for an estimated three million Hong Kong residents who were born before Britain returned Hong Kong to China in 1997.
About 400,000 Hong Kongers currently hold British passports, which would also allow them entry to Canada. “We’re already starting to see money finding its way from Hong Kong to Vancouver and Toronto,” said Tal. “I would not be surprised if, when it’s possible, you’ll see more and more people coming from Hong Kong, given its uncertainty with China. Four hundred thousand people can land tomorrow because they have Canadian passports.”