Canada is facing a worsening housing affordability crisis as the country experiences an unprecedented surge in population growth. According to Statistics Canada labor force data, the working-age population has increased by a staggering 411,400 people in the first four months of 2024, a 47% increase compared to the same period in 2023.
National Bank economists warn that this demographic shock could further strain the already tight housing market, particularly in major cities such as Toronto, Montreal, and Vancouver, where population growth has more than doubled compared to the previous year.
Worse, the federal government’s plans to reduce immigration levels from 2025 onwards may have inadvertently contributed to the current population boom, as many people rush to enter the country before the new policies take effect. This surge in demand is expected to put additional pressure on home prices and rental rates, which are already at record lows.
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Matthieu Arseneau, the deputy chief economist at the National Bank, predicts that vacancy rates could drop below 1% due to the rapid population growth. This, combined with the anticipated interest rate cuts in the second half of the year, is unlikely to improve affordability for first-time homebuyers.
The population growth is also creating challenges for the central bank in managing inflation, as rising rental prices could push the Consumer Price Index higher. In March, rent jumped by 8.5%, highlighting the severity of the situation.
Immigration, Refugees and Citizenship Canada acknowledges the acute challenges related to housing and is working on strategies to support the country’s continued need for immigration while addressing the housing crisis. However, economists believe that it will take several years to alleviate the pressure on the housing market, given the population boom over the past two years.
Information for this story was found via Statistics Canada, and the sources and companies mentioned. The author has no securities or affiliations related to the organizations discussed. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
One Response
Rarely in these articles is it ever mentioned our labour shortage crisis and the need we have for immigration. Instead….inflammatory headlines abound as to the housing crisis the federal government is not fixing (right now). This crisis was created in the 70s….and ignored by all subsequent governments since.