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The expected rise in Canada’s population is likely to make the country’s limited housing supply worse – and ultimately lead to even higher home prices, a report by Zoocasa forecasted.
The influx of immigration to Canada, alongside internal population growth and a shortage of housing, will drive shelter costs up, the report released on Wednesday said.
“The more people who live in Canada, the more homes are needed, which will exacerbate the already limited supply of homes," it stated.
The data showed that 2022 was a record-breaking year for the country’s housing market and immigration numbers.
“The government welcomed the largest number of immigrants in a single year (2022), according to Immigration, Refugees and Citizenship Canada, and at the same time, the national average home price soared to a monthly high of $804,900 – a 31 per cent increase from 2021,” it said.
So far, 2023 has not shown a similar trend.
One possible reason for this could be the aggressive interest rate hikes the Bank of Canada has pursued, the report said. The average home price dropped in 2023 by 5.5 per cent from the year prior, despite immigration reaching a new record of 3.9 per cent growth, it detailed.
The decline is likely to only be temporary, it said.
The report pointed to home price declines throughout the 2008-2009 financial crisis as a point of reference.
“The largest drop in the national average home price in the past 18 years was in 2009, when the price went from $320,500 in January 2008 to $296,300 in January 2009 – a 7.6 per cent decline due to the Great Recession which began in Canada in 2008. It only took a year for prices to recover and from 2010 until 2018 prices continuously climbed,” the data showed.
While overall population growth aids economic activity, the problem of where to house more people still remains.
“Population growth helps to stimulate the economy by filling labour shortages, but a side-effect of this growth is that home prices will likely be driven up higher,” the report said.
The report identified major metropolitan areas throughout Canada, such as Toronto or Vancouver, as key regions where home prices will be pushed upward due to the growth.
“Home price growth and population growth have simultaneously trended upwards and this is likely to continue at an even faster rate in the future,” it forecasted.