Immigrants are drawn here in hopes of achieving the Canadian dream, whether it is a higher income or home ownership. This allows them to plant new roots in a nation consistently ranked as one of the top countries in the world and pass on this wealth to future generations. Evidently, many families that are arriving here may find themselves challenged by the current state of the Canadian real estate market, which saw sales activity climb 1.4 per cent month-over-month in March and the MLS® Home Price Index (HPI) rise 0.2 per cent on a monthly basis. The actual national average home price in March 2023 was $686,371, up more than 10 per cent from the start of the year, according to the Canadian Real Estate Association (CREA). What will it take to ease the Canadian real estate market? Might record-low supply levels be positively impacted by rising interest rates this year?
With that being said, it appears that a considerable portion of immigrants have maintained a bearish view of the Canadian real estate market dating back to 2018, when prices were significantly less than they are today. Will this attitude change in the coming years, with more than one million immigrants projected to enter the country?
New Immigrants Struggle Amid Overpriced Canadian Real Estate Market
According to Statistics Canada’s Housing Experiences survey, two out of five recent immigrants were dissatisfied with the state of the Canadian housing market in 2018. The study found that 63 per cent of recent immigrants were satisfied with their housing situation, below the national average of 82 per cent.
The survey also reveals that Canada’s visible minorities were less satisfied with their housing market compared to the national average. The statistics agency reported that 75 per cent of South Asian households, 74 per cent of Chinese households, and 69 per cent of Black households were satisfied.
Updates to the study should be released by the year’s end as fresh data was collected from October 31, 2022, to March 31, 2023.
This comes after Statistics Canada data from 2019 revealed that immigrant incomes were much lower in major urban centres, such as Toronto and Vancouver. The study revealed that Toronto is the worst place to earn a living for immigrants, with median incomes hovering at a mere $29,600 before the coronavirus pandemic. Meanwhile, Vancouver saw immigrants earning a median income of $31,000. Montreal didn’t fare much better, sitting somewhere in the middle of the list of challenging cities for newcomers.
Overall, after a decade, it is estimated that immigrants coming to Canada will earn a little more than 13 per cent compared to the median for all Canadians nationwide.
National Bank of Canada (NBC) calculations found that prospective homeowners require an annual income of close to $200,000 to afford a house in Toronto or annual earnings of about $215,000 in Vancouver. In total, the financial institution’s qualifying annual income for its urban composite is $144,356, although the median annual income in the index is $77,000.
In the end, the data suggest that the housing affordability crisis is hitting Canadians and immigrants alike. But will these conditions become more pronounced in the next few years?
More Immigrants Will Boost Housing Competition
In 2020, the federal government announced plans to bring in approximately 1.2 million newcomers before the end of 2023 as part of efforts to boost the economy, be it through job creation or supporting the post-pandemic economic recovery. Reports indicate that Ottawa is considering increasing its target for new permanent residents this year.
The federal government later updated its plans, announcing that it intends to welcome roughly 500,000 newcomers annually by 2025.
Permanent resident arrival admissions had begun surging in the months following the announcement, marking some of the biggest monthly gains in a century. The country witnessed the arrival of a little more than 45,000 permanent residents in September 2021.
But while many immigrants are choosing Ontario and British Columbia as the top landing spots, an increasing number of newcomers are looking to Manitoba and Quebec.
Financial experts are split on this public policy pursuit.
“It is a conundrum,” said Stephen Brown, senior Canada economist at Capital Economics.
On the one hand, Canada’s struggling labour market and a falling fertility rate justify the need for immigration. On the other hand, an influx of prospective homebuyers and renters could further crowd an environment where housing supply is already hovering at record lows. The solution, asserted by many industry observers, is a greater push to increase housing supply from coast to coast.
Meanwhile, a February 2023 report by economists from Desjardins suggests that Canada needs to ramp up new housing construction to support newcomers.
The bank’s economists project that approximately 100,000 more homes need to be constructed annually in 2023 and 2024.
“Increasing the housing supply beyond the typical demand response would also take pressure off prices but requires extraordinary policy intervention and resolve,” the economists wrote in the report. “Indeed, we estimate that housing starts would have to increase immediately by almost 50 per cent nationally relative to our baseline scenario and stay there through 2024 to offset the price gains from the increase in federal immigration.”
An Expensive Canadian Housing Market in 2023?
Whether you’re a recent immigrant or a Canadian citizen, elevated real estate prices are a likely reality in 2023. Remember, despite the correction in the broader housing sector, prices are still higher than they were before the coronavirus pandemic.
According to the RE/MAX 2023 Canadian Housing Market Outlook, average residential real estate prices are forecast to tumble by 3.3 per cent across the country. Moreover, it is estimated that 60 per cent of housing markets are poised to shift into balanced territory, offering more households an opportunity to buy homes.
“We’re confident that as economic conditions improve and the market continues to even out into Q3/Q4 2023, a more-regular pace of activity will resume. It’s especially critical during challenging economic times, that staying informed and working with an experienced real estate professional can help Canadians clarify some of the unknowns, help them find a home within their means, and ultimately make the best decision possible,” said Elton Ash, the Executive Vice President of RE/MAX Canada, in the report.
With inflation easing and growth in housing prices slowing down, new immigrants might find some relief.