An industry president expects the effect to be steady rather than spectacular
In an otherwise flourishing mortgage market, the absence of one key demographic has been keenly noticed since the beginning of the COVID-19 pandemic: new immigrants, traditionally a significant contributor to mortgage demand in Canada.
The imposition of global travel restrictions, flight bans and border closures as the pandemic spread in late 2019 and early last year had a predictably stark impact on immigration levels. The number of new immigrants arriving into the country in 2020 plummeted to just 184,000 – some way off the government’s target of 341,000, and the lowest total since 1998.
In a clear recognition of the crucial role played by immigration in the Canadian economy, the federal government has announced plans to welcome over a million new immigrants to the country over the next three years: 401,000 this year, followed by 411,000 in 2022 and 421,000 in 2023.
Christine Xu (pictured top), president and owner of the MoneyBroker Canada brokerage, told Canadian Mortgage Professional that despite the strength of the mortgage market over the past year and a quarter, the adverse effect caused by lower levels of immigration was also apparent.
“We can see the decrease of new immigrants, even students – it [has] a huge impact because the downtown condo market, for instance, is not that active,” she said. “Rental prices are decreasing, as there’s just not too many people working or studying downtown.”
With Prime Minister Justin Trudeau having indicated his intention to reopen the Canadian border to fully-vaccinated tourists and foreign travellers from the beginning of September (August 09 for US tourists and residents), hopes have risen that some degree of normality could be set to return in Canada’s immigration levels in the coming months.
Last month, Royal Bank of Canada (RBC) economist Robert Hogue told The Georgia Straight that immigration could even serve as a “safety net” in the coming years against the possibility of a housing bubble developing in Canada.
Still, while new citizens and permanent residents hold sizeable purchasing power in Canada’s housing and mortgage markets, Xu noted that it could take some time for many to decide that it’s safe to travel – particularly from China, where reported new COVID-19 cases have fallen substantially in recent months.
“Hopefully, in September, the borders will be more open than now, and [the current situation] will change,” Xu said. “I think it will not be as hot as the beginning of the year.
“The new immigrant is a huge buying force in the country, especially in larger cities like Toronto and Vancouver, but I’m dealing with the Chinese immigrant [community] and lots of them are not in a hurry to come back. Right now, China is the safest place in the world regarding the COVID situation.”
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One sometimes overlooked area where immigration could still have a big impact for the rest of the year is the commercial sphere. While non-resident speculation taxes in Ontario and British Columbia have proven controversial, and are sometimes viewed as an impediment to building and supply, similar levies don’t apply to commercial property, making that an attractive prospect for foreign investors.
“Lots of investors are thinking about the commercial market,” Xu said. “For investors, there’s no foreign buyer’s tax if they’re on the commercial side, so it’s getting very active.”
A pandemic-era development that Xu believes is likely to continue as Canada’s reopening gathers pace is the shift away from the city that’s seen many homebuyers gravitate towards areas outside the country’s urban centres, particularly Toronto and Vancouver.
“Lots of people would never have [considered] remote working, but they now know that it’s a possibility,” she said. “There are also people who just realize they don’t need to be downtown anymore; they’re outside the GTA, it’s cheaper and there’s a bigger space – so why not? I think the trend will continue.”