Increased immigration is anticipated to promote economic development and alleviate a deteriorating post-pandemic labour shortage in Canada, but newcomers may add fuel to a smouldering property market that the central bank has cautioned was fuelled by “a rapid rush of investors.”
According to a government source, Prime Minister Justin Trudeau’s administration is on track to fulfil this year’s goal of 4,01,000 new permanent residents and is planning to raise next year’s objective to 4,11,000. In the face of a dwindling fertility rate, which hit a new low last year, Canada’s successive administrations have relied on immigration to promote economic growth.
With the pandemic forcing aged Canadians to retire early, luring immigrants has become increasingly crucial. In addition, the country focuses on high-skilled immigrants, who are more likely to bring money and earn enough to compete for coveted housing.
“Canada needs immigration to create jobs and drive our economic recovery,” Immigration Minister Sean Fraser told Reuters. “It’s not just that one in three Canadian businesses are owned by an immigrant, but also that newcomers are helping to tackle labour shortages.”
Low mortgage rates and a scarcity of housing have pushed up housing expenses. Another element, especially prior to the pandemic, was migration. More newcomers are likely now that most borders have reopened. Inflation has reached its highest level in 18 years, thanks to rising housing costs. Government promises to reduce housing costs will take years to implement, and certain measures may boost demand even more, according to analysts.
The impact of immigration on housing costs is a “conundrum,” according to Stephen Brown, the senior Canadian economist at Capital Economics.
Nonetheless, continued construction and a labour shortage justify additional immigration. Brown claims that Canada’s labour force will “flatten” if immigration is not allowed. According to official figures, job vacancies in Canada have doubled so far this year. Because of a labour shortfall in industry, the Canadian Manufacturers and Exporters Association is urging the government to increase its objective for economic class immigrants by 2030.
Since Trudeau assumed office in November 2015, the benchmark home price has increased by 77.2 per cent. His government intends to offer a housing package to parliament, which would include a C$4 billion ($3.2 billion) fund to speed up housing plans in the country’s main cities.
Immigrants are more likely to buy in large urban areas, such as greater Toronto and Vancouver, where home prices have risen above C$1.12 million, according to Statistics Canada. According to realtor data, the average property currently costs C$7,62,500 ($6,00,299) in Canada.
According to Zillow, the average home in the United States is worth $3,12,728. Rapid price increases are expected to slow next year, while Reuters polled analysts predict that home prices in Canada would rise 5.0 per cent in 2022, making them less accessible. The government fund’s goal is to build 1,00,000 new “middle-class” homes by 2024-25, and the money will go to communities that can demonstrate they can speed up the process.
Economists believe that this policy will be beneficial, but that other measures in the housing package will stimulate demand even more. According to real estate broker Jodi Gilmour, the Peel region – which is part of the Greater Toronto Area – was admitting around 45,000 newcomers per year before the pandemic, but that ceased during the pandemic due to border closures.
“Right now we are seeing a rush of buyers trying to beat the two things that are going to change their position going into 2022, which are rising interest rates and competition from immigrants,” she said.