Record high immigration into Canada is creating more problems for Canadians in an already strained housing market, financial analysts are warning.
Canada is on track to take in 447,055 immigrants this year and 451,000, according to Immigration, Refugees and Citizenship Canada (IRCC), an increase over its previous projections. IRCC says Canada will take in 500,000 immigrants a year starting in 2025.
This could have dire consequences for housing and employment, those in the financial sector say.
Vancouver-based Robert Mogensen, a broker with the Mortgage Advantage, says such steep immigration targets would only make sense if Canada’s housing capacity was already meeting Canadians’ needs—but it isn’t.
The lion’s share of newcomers is from what IRCC calls the “economic class,” meaning they’re skilled and moneyed.
Noting the influence of foreign money on domestic housing prices, Mogensen worries affluent newcomers will increase competition for what’s already a short supply of affordable homes.
“The influx of cash (that) comes with the number of well-heeled immigrants will continue driving up the price of real estate,” he said.
“But having a lot of money doesn’t mean you should have a better opportunity for moderately-priced housing than people who have lived here all their lives, or even for people who immigrated here a long time ago.”
It isn’t just the cost of homeownership that’s surging; rental prices in Toronto and Vancouver are stratospheric.
With the federal government’s two-year foreign buyer ban that began this year, just weeks after announcing the 500,000 annual immigrant target, there’s going to be even more pressure on the historically tight rental market, says Toronto-based Isaac Quan, managing broker at Living Realty Downtown.
“It totally doesn’t make sense,” he said. “I speak to a lot of clients who were looking to buy but gave up because prices are too high, so they’re looking to rent now, but because of the foreign buyer ban and all the increased competition in the rental market, they’re renting in the outskirts of Toronto in places like Markham and Scarborough, even though they may work downtown.”
Exorbitant prices traditionally pushed determined homebuyers to the metropolitan’s fringes, and now the same thing is happening to a growing cohort of renters unable to afford $2,500 to $3,000 a month in rent, Quan added.
Moreover, well-heeled newcomers accustomed to high rents in places like Hong Kong are better positioned to compete for precious rentals in Toronto. Quan says it’s common for new immigrants to pay up to two year’s rent up front in lieu of providing landlords traditional documents like credit reports and records of employment.
“The people coming here have higher net-worths and they’re pricing out Canadians by giving advanced rent,” Quan said. “If you’re coming here from Hong Kong or Singapore, places with very expensive real estate and where the tax systems are more favourable to workers, $50,000 up-front isn’t as much for them as it is for local Canadians, who pay higher taxes, have a higher cost of living here, and lower wages. It’s hard to compete with immigrants from other parts of the world.”
Not all immigrants are wealthy, and they, too, compete for the same rental apartments as everybody else.
“It causes a lot of anxiety among renters and younger people I meet because they’re never secure,” Quan said. “If you own your own home, there’s no fear of getting kicked out, but if your landlord wants to sell your rental, where are you going to go that you can afford?”
