Canadian Housing Market Will Stay Down ‘For Years’ Due To Lower Immigration: Report
Immigration to Canada will fall in the wake of the pandemic, putting downward pressure on house prices, Capital Economics says.
MONTREAL ― There is little agreement these days among the prognosticators as to what exactly is headed for Canada’s housing market in the wake of the COVID-19 pandemic.
Several recent forecasts predict rising house prices this year, even amid massive job losses and a shrinking economy.
But an economist at U.K.-based Capital Economics says Canada’s house prices are set to fall, and stay down “for years” because the country can expect a decline in immigration levels.
“Demand for housing has become extremely reliant on immigration,” Stephen Brown wrote in a client note this week.
He predicts house prices will drop 5 per cent during this crisis, and with lower immigration levels in the years to come, both prices and sales will stay below their pre-COVID-19 levels for a prolonged period.
Brown noted that “immigration has slumped following four of the past five recessions, as higher unemployment reduced the incentive to move.”
But that’s not always the case. If Canada does relatively better than other countries in the crisis, it will still be a draw.
“For instance, immigration rose after the (financial crisis of 2008-09), when Canada was relatively less affected than most countries,” Brown wrote in an email to HuffPost Canada.
If immigration does fall, the housing market will be the hardest hit part of the economy, he said.
“Investors have based their (house or condo) purchases on the assumption that immigration will keep rents growing strongly. That will be a questionable assumption even if restrictions on travel are soon lifted.”