CEO on the importance of immigrants to the housing market in the coming years
An influx of new immigrants into Canada in the coming years could help the housing market’s trajectory and offset the impact of interest rate rises, according to an industry veteran.
Ron De Silva (pictured), president and CEO, Broker One, told Mortgage Broker News that low interest rates had helped compensate for the lack of new immigrants entering the market since March 2020 due to COVID-19, and that newcomers to Canada would now play an important role in propelling the market when those rates rose.
“During the pandemic, we had non-existent immigration to Canada, but interest rates dropped so low that they sustained the market,” he said. “Now, once we come out of this pandemic we’ll probably have some inflation and the rates will likely go up a little bit – but it might be offset by more immigrants coming back into the fray.
“I think we’re probably looking at a very balanced future in our industry.”
The outbreak of the pandemic saw a dramatic drop-off in the number of newcomers to the country, with the official number of new permanent residents arriving in 2020 – 184,370, according to federal government figures – falling well short of the targeted 341,000.
That shortfall likely had a significant impact on the housing market. The 2016 federal census showed that 39% of immigrants who arrived in Canada during the previous five years owned their homes; those home ownership rates rose to 70% for established immigrants who had spent at least five years living in the country.
The shortfall in new immigrants last year led the federal government to unveil even more ambitious targets for 2021, with minister for immigration Marco Mendicino announcing last October that it planned to welcome 401,000 new permanent residents to the country this year.
De Silva also noted that movement within Canada would help propel the housing market in the near future. “You’re going to have demand in Ontario for sure – and of course, the largest centres attract people,” he said. “Those centres will probably buoy the real estate market because of demand that will continue to grow.”
While a continuation of the current madcap pace of the housing market seems unlikely, De Silva said that the coming years were likely to see “more of a steady flow” with demand settling, more inventory entering the fray, and properties returning to a more reasonable time on the market.
“What we’re seeing right now is around three to seven days [on the market],” he said. “Eventually, you’re probably going to see 45-60 days, which is really a normal market.”
De Silva, who launched Real Mortgage Associates in 2006 and still serves as the company’s principal broker, said that the role of the mortgage broker would always have value regardless of whether the market was up or down.
“I’ll tell you something about brokers: we’re very versatile, and we’re good at survival – no matter what has been thrown at us,” he said. “In October 2016, our world was completely changed [by the introduction of the mortgage stress test]. An outsider might have thought that that would be the end of the broker profession. But look at what’s happened since.
“I think as rates rise, there are things that we will be able to do to make sure that we mitigate any downside risk.”
De Silva said that the controversial Office of the Superintendent of Financial Institutions (OSFI) proposals to hike the mortgage stress test rate in June may prove unnecessary as a measure to cool the housing market, which has already calmed considerably in his eyes.
“I don’t think it’s going to be needed,” he said of the proposed increase. “I think the market itself is settling right now. We may have lower interest rates for the next little while, but I certainly don’t see the craziness that we’ve seen over the last couple of months continuing on.”