Sceptics have said that Canada’s major cities are being overbuilt, potentially putting us at risk for a housing bust if the available housing outstrips demand. But CIBC released a new report last week that paints a more positive picture of Canadian housing.
Authored by CIBC economics Benjamin Tal and Nick Exarhos, the report shows how immigrants to Canada have helped to increase demand for housing.
“Not only has the rising share of young immigrants lifted demand for housing, but also, official population projections understate the actual number of non-permanent residents in the country by close to 100,000.”
Canada’s 2011 census shows that the country had close to 400,000 non-permanent residents, yet Citizenship and Immigration Canada (CIC)’s numbers are over 200,000 higher. Immigrants make up the majority of Canada’s new household formation. Of these non-permanent residents, roughly half are temporary workers, followed by students and humanitarian refugees, respectively.
The report goes on to state that:
“despite some concerns of overbuilding in the current housing boom, the ratio of housing starts to household formation is not far from its long-run average of 1.03. The broadly in-line aggregate trend in Canada’s homebuilding means that the eventual wind-down in the current boom won’t have to be as dramatic as feared by some.”
Tal and Exarhos mention that Alberta, British Columbia and Ontario are building more aggressively than other provinces (though condo-building has calmed down in Toronto in the last couple of years, Vancouver is still seeing several new developments in progress). However, Calgary, Toronto and Vancouver also see the bulk of newcomers to Canada, so growing demand from immigrants may help absorb much of the new housing being built in those cities.
Non-permanents residents who need flexibility in their housing aren’t necessarily keen on buying real estate that would keep them rooted in one place. They may be better candidates for renting, but those who pursue eventually permanent residency or citizenship may choose to buy a home in Canada and set down roots long-term. Here’s a look at home-buying considerations for immigrants. Oftentimes, newcomers choose condos, as CBC points out, so we’ve also covered special considerations when buying a condo.
The Canadian government plans to raise the immigration quota by 20,000-30,000 per year, focusing on labour market needs. The CIBC report concludes with a prediction that housing starts will average 190,000 per year through 2016, an increase of 10,000 over the bank’s previous projection.