Canada’s new immigration policy is unlikely to have a negative impact on the rental-housing market, according to a new GWL Realty Advisors (GWLRA) report.

The federal government is aiming to reduce the number of non-permanent residents and lower targets for new permanent immigrants. (Although the government has introduced a number of new policies, they are generally referred to as one policy.)

The report analyzed the impact of new Canadian government positions on population growth, revealing a return to the long-term rate of 1.1%, said Wendy Waters, GWLRA’s head of research in an interview with Connect Canada CRE.

“So, we wanted to point out that, although it may have, when it was first announced sounded somewhat alarming, it’s actually a fairly measured correction to some COVID [pandemic] disruptions that we had,” she said.

Ottawa plans to decrease the percentage of non-permanent residents—primarily temporary foreign workers and international students—to 5% from 7% over the next two years. This shift would result in an annual net reduction of 445,000 residents.

Additionally, annual targets for new permanent residents will drop to less than 400,000 from 500,000, potentially leading to a population decline of 0.2% in both 2025 and 2026.

Despite the reductions, GWLRA’s research suggests that the impact on the real estate market will be minimal. There is actually a lot of underlying stability in “this very long-term, reliable population growth rate,” said Waters.

The report notes that the current slowdown in immigration could ease upward pressure on rents and housing prices.

A cooling economy, coupled with expected interest rate cuts, may encourage new housing construction, stabilizing the market.

Waters said the reductions could enable available rental-housing supply to grow in the next couple of years.

“The need for housing is obviously a key consideration,” she said. “And, right now, we’ve got a couple of years to, perhaps, catch up on some housing construction with less pressure from as many newcomers to the country.

“So, hopefully we’re able to build more housing. The policies around housing construction are able to facilitate that.”

In the two years after the pandemic, population growth jumped by nearly 3%. The revised immigration policy has already had an effect on the multi-residential rental sector, said Waters.

Markets are already facing less upward pressure on rents; and with the number of non-permanent residents set to fall, that trend will continue, she said.

“That means that there won’t be the fairly strong rent growth,” she said. “But we’ve had really strong rent growth for five years, so we’re seeing somewhat of a correction.”

Waters said the government faced political pressure to reduce immigration. But GWLRA looked more at longer-term patterns. The company found that the long-term 1.1% average population growth rate makes sense, and it has worked, she added.

“The main difference is that we used to have some of our population growth from more births than deaths,” she said. “That’s gone. It will be more population growth from newcomers who come as adults, which is a different way.”

The report highlights four reasons for a more measured outlook: long-term immigration stability; temporary foreign worker adjustments; international student policies that impose tighter rules that mainly affect smaller or lesser-known schools; and the return to normal population growth.

The retail market could see a reduction in sales of essential items like groceries and personal products, and the industrial sector could also see a decline due to fewer non-permanent residents, said Waters.

“But keeping in mind there’s also an economic slowing going on that’s irrespective of the outflow of the non-permanent residents, and that’s having a larger effect than the outflow population, in fact, it’s a really a normal response in Canada,” she said.

“When we have really strong job growth, there’s often not enough Canadians to do all the jobs. So, we bring in some temporary foreign workers to help. When the economy slows and unemployment rates are rising, we don’t need as many temporary international workers. So, we’re not seeing [the reduction] as being the biggest impact on commercial real estate.”

With immigration remaining critical to Canada’s economic and social stability, the policies may evolve if economic conditions improve, potentially reigniting demand for rental and ownership housing in the future, states the report.

“Long-term effects, I think, will be fairly minimal,” said Waters. “We’re going back to the same stable population growth and economic growth which commercial real estate investors often like about Canada and Canada’s major cities.”

But it will be a “tall order” for the government to reduce the number of non-permanent residents to 5% from 7%, she added. GWLRA took the government at its word that it can meet its target.

The largest outflows of non-permanent residents are likely to occur in markets that have most of them, such as Toronto, Montreal and Vancouver, depending on how many arrived in the past two years, said Waters. While those three regions could feel more of an impact, it’s possible that they will see some job growth that leads to more more migrants from other parts of Canada and more permanent international newcomers, said Waters

Even with the policy changes, there are many opportunities for immigrants in the healthcare and construction sectors, she said.

Waters would like to see Ottawa continue to target sectors that face ongoing labour shortages, and continue to welcome people looking to build a life in this country and fill its employment gaps.

“It’s really important for everyone to recognize the importance of immigration to Canada’s economy, the importance of immigration to just our society and our well-being as Canadians and Canadian residents,” she added.

Waters co-authored the GWLRA report with her colleague Vaishali, a senior research analyst who goes by only one name.

Pictured: GWLRA two-tower apartment redevelopment project in downtown Vancouver

Rendering: Courtesy of GWLRA