Canadian Real Estate Fuelled or Cooled by Immigration Policy? 

From the recent report by Re/Max Canada, the Conference Board and CIBC, largely cheerleading the government’s increased immigration levels but emphasizing the need for more trades in the mix of immigrants to help address labour shortages in construction:

SCENARIO: Canada fulfils its commitment to welcome more than 400,000 immigrants per year to the country with a continued emphasis on integrating Economic Immigrants who generally have higher education, English and French skills, and prior Canadian work or study experience.

“Immigration produces significant benefits for the Canadian economy as a whole and helps meet the labour market needs of particular communities and sectors. Canada’s system excels at selecting immigrants who have a high likelihood of long-term economic success. However, the system could improve by selecting more immigrants to fit specific, chronic labour market needs. In particular, a focus on immigrants with skills in the trades and construction could help address severe labour shortages that limit housing supply,” says Iain Reeve, Associate Director, Immigration Research, Conference Board of Canada.

Canadian real estate and immigration_Immigrants welcomed to CanadaResearch by the Conference Board of Canada has shown that higher immigration levels can benefit the Canadian economy with greater GDP and public revenues [Note: Overall GDP not per capita GDP]. CIBC Capital Markets and The Conference Board of Canada agree that the Canadian economy needs a minimum of 400,000-plus new immigrants annually to sustain our economic vibrancy.

In fact, despite the pandemic, Canada accepted approximately 405,000 new Canadians in 2021. According to Benjamin Tal, Deputy Chief Economist at CIBC Capital Markets, what is not often reported is that 70 per cent of the 2021 cohort were already established in Canada and approximately 50 per cent of the 2022 immigrants will be in-country. The key insight here is that we are not looking at 400,000-plus net new individuals settling anew in Canada with housing needs, but approximately half that number. They have been students and non-permanent residents with employment, promising prospects for employment and all with housing. 

New immigrants are not the only factor to consider in determining housing demand. The formula is complicated and often does not look at things such as immigrants already living in Canada and Canadian students in temporary housing. To get an accurate measure of housing demand, further refinement is needed to housing data collection methods, according to both CIBC Capital Markets and The Conference Board of Canada.  

As Tal explains, the profile of new Canadians is quite distinct from historical immigrant cohorts. Many have higher educational credentials and Canadian work experience. For example, just 10,000 new immigrants in 2015 held a post-graduate work permit, versus more than 88,000 in 2021, according to data compiled by the Conference Board.

Canadian real estate and immigration_Immigrants who are homeownersIt takes 10 years for immigrants to have earnings that are commensurate with their skills, education, and experience when compared to similar Canadian-born workers. According to Tal, that time has decreased by approximately half. In part, this is a result of Ottawa’s emphasis on economic immigrants and better immigrant support systems. This means that new immigrants can land on their feet faster and participate in the Canadian economy in various ways, such as entering into Canadian real estate ownership. In 2021, 38 per cent of homeowners in Canada were immigrants.

However, as both CIBC Capital Markets and The Conference Board of Canada state, Canada’s immigration levels alone are not an issue. There is a missed opportunity by not selecting more immigrants who are trained in the trades, where all regions across Canada are experiencing a deep labour shortage. 

In reference to the construction sector alone, BuildForce Canada reported that 90,000 workers will be leaving the workforce in the next five to 10 years due to retirement. Yet, Canada has not accepted enough skilled trade immigrants in 2021 to fill these labour market gaps, according to the Conference Board of Canada. This will impact Canada’s ability to fulfill the new housing and affordable housing starts as predicted by the federal government.

“Currently, Canada’s federal immigration policy does not link with the country’s labour market needs and that will be a mounting problem in our capacity to build enough homes to meet the high demand over the next five years,” says Tal. “It’s all fine to table policy to improve our national housing affordability crisis by promising to build more homes and affordable housing — it’s critical — but it’s superfluous when you don’t have the skilled workers
to build it.”

“For several years now, RE/MAX Canada has been advocating for a coherent and achievable national housing strategy to calm red-hot price increases and more importantly, to improve affordability for a greater diversity of buyers and renters,” says Elton Ash, Executive Vice President, RE/MAX Canada. “Yet, as the experts at CIBC and The Conference Board show, our current immigration policy is lacking sufficient linkages with labour demands and as such is not set-up as successfully as it could be. Immigration policy should help support our labour demands.” 

Source: Canadian Real Estate Fuelled or Cooled by Immigration Policy?

About Andrew
Andrew blogs and tweets public policy issues, particularly the relationship between the political and bureaucratic levels, citizenship and multiculturalism. His latest book, Policy Arrogance or Innocent Bias, recounts his experience as a senior public servant in this area.

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