There is some fear in the current red hot real estate market, that the bubble may burst and we may see a collapse in the housing market. While there may be a slight correction in the near future as is the trend with red hot markets, the effect will be less drastic when immigration is factored into the equation.
The Canadian Government has set an ambitious immigration target for 2021 – 2023 of more than 1.2 million immigrants, to help reduce the current skilled labor shortage and to offset an aging population. Canada is targeting 401,000 new permanent residents in 2021, 411,000 in 2022 and 421,000 in 2023, which is roughly equal to 1% of the population for each of those years.
Immigration rules prescribed by the government’s aggressive immigration policy, require that permanent residents must bring some of their wealth into the country, so they will not be a financial burden to the government. Many of the 400,000 new entrants will be looking for homes to buy, while others will be renting.
So, immigration can be seen as a sort of “safety net” for the housing market, which can dispel some of the fears that we are in a housing market bubble, which will burst soon causing a sharp decline in home prices. The ambitious resumption of high immigration levels should provide support for the housing market.
What about the international students? The soaring number of international students coming into Canada will also feed into the demand for housing. In 2019, Canada issued a record 402,000 new study permits, according to Immigration Refugees and Citizenship Canada (IRCC). Higher quotas are currently being contemplated. Many students purchase apartments while others opt to rent or stay on campus. A significant number of these students will settle here for good, thanks to the government’s easy path to permanent residency.
While tougher mortgage rules will most likely “pour some cold water” on our red hot real estate market, the impact will be short lived, as demand for homes should increase due to the influx of immigrants and students, and the critical shortage of housing that this city is currently facing.
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