27 June 2019
Previously, research focused mostly on housing needs of recent immigrants who tried to find a normal job in Canada. As a rule, new immigrants found home in low-income neighbourhoods, then, when they assimilated, immigrants switched from renting to owning a home.
But immigrants are not always with a low income. For example, investor-class immigrants are usually wealthier than the local population, so they actually can represent a significant influence on the real estate prices.
Moreover, immigration is also responsible for the net increase in Canada’s population. As the workforce is aging, more young and educated immigrants are vital for the national economy. That’s why in 2019-2021, Canada will welcome more than one million immigrants, with economic migrants representing most of them.
Many economic immigrants keep settling in the three most populous city regions in Canada: Montreal, Toronto and Vancouver. Nevertheless, today, these cities attract fewer immigrants than earlier: 72% of economic immigrants chose the big three in 2004, but only 51% – in 2014.
The initial worries focused on the impact from non-resident speculators, not immigrants who wanted to build their lives in Canada.
The big cities seem more attractive for the business class immigrants and skilled workers. In 2014, the big three welcomed 85% of the business class immigrants and 70% of the skilled workers.
Usually, immigrants choose larger cities due to more working possibilities. When the real estate prices are going down, immigrants provide the additional demand for housing, necessary for stabilizing the markets. But when the prices are rising and the supply is restrained, it could lead to even a higher demand.
According to Ather Akbari and Yigit Aydede of Saint Mary’s University, immigration contributed to only a 0.1%-0.12% home prices gain. But this research focused on immigrants, who came here at least 10 years ago and contributed to the increase.
The authors say such a small influence of immigration was reported as the native-born were leaving the regions chosen by the new immigrants. In addition to it, growth in new housing construction in response to stronger demand also offset the impact.
Although Akbari and Aydede’s findings show that immigration could hardly be a driving force for the sharp prices increase, recent research points to wealthy immigrants, who could be responsible for price growth in certain neighbourhoods.
Andrey Pavlov of Simon Fraser University and Tsur Sommerville of the University of British Columbia found that the unexpected end of an investor immigration program reported a negative impact on house prices (1.7% – 2.6%) in the neighbourhoods most popular among the investor immigrants.
Immigrants account for a large share of population increase in the Vancouver Metropolitan Area. Moreover, British Columbia has been always attracting investor immigrants. The investor immigration program, started in 1986, was suspended in 2012 and closed in 2014.
This closure let the researchers estimate whether home prices in Vancouver neighbourhoods benefitted from wealthy immigrants decline. According to the authors, high levels of wealthy immigrants in certain Vancouver regions led to higher house prices.
The impact from immigration also concerns rental markets. Ehsan Latif of Thompson Rivers University says higher immigration level relative to the size of the province’s population had a small influence on housing rents. In his opinion, the reason for that is out-migration of the native-born from areas most popular among immigrants.
Several researches show that the general influence of immigration on real estate markets is modest or weaker.
Moreover, the absence of immigration would lead to decreasing population and ageing of the workforce, which will have a much more disastrous effect on the national real estate markets.