Home prices will rise due to influx of newcomers to Canada, reducing affordability.

A new report by Desjardins Economic Studies has found that Canada will need to construct an estimated 100,000 new houses per year to accommodate the federal government’s immigration targets. The report states that construction would have to increase by almost 50 percent and remain at that level through 2024 in order to offset higher home prices due to immigration. The report notes that the different provinces immigrants settle in will affect Canada’s housing market and prices. If immigrants continue the trend of moving to Ontario and British Columbia, affordability there and nationally will erode further. However, if they move to places that have done a better job of integrating immigrants, such as the Prairie provinces, this will provide an offset to the impact of higher immigration on home prices. The report also suggests that the supply response is likely to be insufficient, which will cause a spike in prices and less affordability across the country, especially in provinces with already high prices. To reduce pressure on home prices and housing affordability, the report suggests that the influx of immigrants should follow patterns from 2016 and relocate to the Prairies. Regardless of where new immigrants move to, the report concludes that Canada will need to immediately start construction of about 100,000 more houses than the baseline on average in 2023 and 2024. This is much more ambitious than the federal government’s plans, most recently discussed in Budget 2022. The report also notes that the rate at which immigrants are arriving in Canada is outpacing the country’s ability to house newcomers, and if there are no new government policies to accelerate homebuilding, prices will rise quickly in 2024 and fewer Canadians will be able to buy a home. Finally, the report suggests that reducing housing red tape, such as exclusionary zoning and the use of heritage designations, would help to reduce the pressure on home prices and housing affordability.