Canada's Housing Market Faces Further Pressure Amid Planned Immigration Cuts
National Bank of Canada economist Daren King warns that Canada's real estate sector could face additional downward pressure over the next two years if federal immigration reductions proceed, as unsold new home inventory hits record highs and sales continue to decline.
Canada’s housing market may endure further strain over the next two years if the federal government moves forward with planned immigration cuts, according to National Bank of Canada senior economist Daren King. King stated that the worst of the demographic adjustment for the real estate market could still be ahead, potentially putting more pressure on the sector.
The warning follows an immigration plan introduced by Justin Trudeau in late 2024, which called for reducing non-permanent residents (NPRs) to five per cent of the population by the end of 2027. According to Statistics Canada, the share of NPRs stood at 6.7 per cent as of July. While this figure was up from an April estimate, it remained below the 7.2 per cent recorded earlier in 2024.
Despite a smaller-than-expected drop in the NPR population, the housing market has slumped amid rising interest rates and tariff issues. The number of newly built and unsold homes in Canada is currently at its highest level since records began. In September, Canadian housing sales fell nearly eight per cent compared to a year ago, and the national benchmark price declined 3.5 per cent. According to the Canadian Real Estate Association, the composite benchmark price is down 23 per cent compared to the pandemic peak in early 2022.
Provincial markets are experiencing significant stress. Home sales in British Columbia and Ontario are approximately 22 per cent below their 10-year average. Over the next two years, British Columbia’s population is expected to contract, while Ontario’s population is projected to flatline. Quebec is forecast to take the biggest population hit among the provinces, adding stress to its resale housing market where sales have already fallen below the 10-year average.
Federal officials have signaled some flexibility regarding population targets. Prime Minister Mark Carney stated in September that he was open to a "controlled increase in the population." Ottawa also recently announced changes to an immigration program for high-wage occupations, such as engineers and electricians, aimed at increasing numbers and driving economic growth. The federal government is expected to announce its immigration plans for 2027 to 2029 on November 1.