Immigration will have a larger effect on the Canadian housing market than millennial first-time buyers. Millennials have been largely renting instead of considering homeownership among such high prices. In contrast, Canada’s immigration levels are substantially growing every year.
- Canada received about 300,000 new immigrants last year
- Canada’s annual immigration target is 450,000 by 2021
- Millennials are choosing to rent instead of buying their first home
In the medium to long-term, immigrants will help boost Canada’s housing boom more than millennials first-time buyers. “As millennials move past their prime household formation years beyond the middle of the next decade, immigration is emerging as a key driver […],” says Adrienne Warren, senior economist at Scotiabank.
Immigration levels in Canada reached 300,000 last year, up from an average of 260,000 over the past decade. Although this Canada’s highest level of immigration almost a century, the government aims to grow annual immigration to a target 450,000 by 2021.
Many millennials are still priced out of homeownership, and those that are moving out of their parent’s home are choosing to rent. In fact, millennials are the main driver of rental demand, Warren says.
Strong demand also means rental vacancies are falling to new lows. “The average vacancy rate for purpose-built rentals has dropped to 1% in Toronto and 0.9% in Vancouver,” which is “well below the 3% level typically considered balanced,” Warren says.
As more Canadians buy homes in 2018, the country will see “growing rental and homeownership demand, elevated new construction, and ongoing urban population densification,” Warren concludes.