Legal immigration to Canada is a driving force behind the health of housing markets.
And, just as it has presented challenges to every aspect of life as we know it, or knew it, COVID-19 has severely restricted legal immigration to our country.
A recent report from ATB says legal international immigration to Canada in 2019 was 341,175 people. In Alberta, it was 43,690 people, accounting for more than half of the province’s growth last year.
It’s a different story this year.
“The number of permanent residents admitted into Alberta from other countries over the second quarter of 2020 was down by 65 percent compared to the same period last year,” says ATB. “At 64 percent, the number of permanent residents who came to Canada during the second quarter was down virtually the same amount as it was for Alberta.”
ATB says arrivals in Alberta in June were down 49 percent, year over year, and 44 percent nationally, which is an improvement.
“But with the virus remaining in play, many travel restrictions still in place and slower processing times, it will take time before the levels fully recover,” says ATB.
The importance of immigration to housing is highlighted in a report, called How Brain Gain Sustains the Canadian Housing Market, written earlier this year by Matthieu Arseneau, deputy chief economist, National Bank of Canada, Financial Markets.
Canada’s population grew by 1.4 percent in 2019, which Arseneau notes, “was exceptional, the highest in almost three decades.”
The gain in absolute numbers “was more than the increase for France and England together, though their combined population is three times that of Canada. And more than 80 percent of Canada’s 2019 increase was due to net immigration.”
A majority of the newcomers are direct contributors to the economy, says Arseneau.
“OECD (Organization for Economic Co-operation and Development) data show that about 60 percent of the annual inflow of permanent residents are ‘economic’ immigrants; applicants selected for their ability to become economically established in Canada,” he says. “In 2016, the most recent year for which the OECD has reported, almost 160,000 of those granted permanent residence in Canada were economic immigrants, more than the absolute number of such immigrants to the U.S. Canada is now undeniably the biggest talent raider in the OECD.”
OECD adds Canada has an environment highly attractive to the most able people, ranking fifth for offering what skilled workers want and first for what entrepreneurs want.
“Of its foreign-born population of working age (15 to 64), almost 70 percent have had post-secondary education, by far the largest proportion in the OECD and almost 30 percentage points higher than the proportion for the U.S.,” says Arseneau.
The key demographic for the housing industry is 25- to 44-year-olds.
“In 2019, like the population as a whole, this age group grew more than in any year since 1990. Almost all the growth was due to immigration, which is increasingly concentrated in this cohort.
“In 2018 and 2019, this age group accounted for more than 55 percent of immigrants, unprecedented in the last 50 years,” says Arseneau. “We can learn more about 25- to 44-year-old new arrivals in the most recent census, that of 2016. Countrywide, 55 percent of those who arrived in the five years preceding the census (2011-15) hold a bachelor’s degree, a proportion higher than among those arriving earlier and, very strikingly, 27 percentage points higher than among those born in Canada.”
Homeownership is on their to-do list.
“The census also reports that many become homeowners quite soon. No fewer than 30 percent of the 25- to 44-year-old immigrants arriving in the previous five years were homeowners,” says Arseneau. “Among those who arrived between five and 10 years previously, 53 percent were homeowners, only six points less than the percentage for Canadian-born. In Toronto, Vancouver and Calgary, their ownership rates were even higher than those of Canadians.
“The appetite of immigrants for real estate is corroborated by a 2019 Statistics Canada study. It reports that 25- to 44-year-old immigrants have a ratio of debt-to-disposable income 25 percent higher than that of native-born Canadians, a difference due entirely to mortgage debt.”
StatsCan also found all indicators of financial vulnerability show them in better shape than Canadian-born.
“Among credit-card holders, for instance, 58 percent usually paid off their balances every month compared to 52 percent for Canadian-born families,” says Arseneau. “Only two percent had taken out payday loans in the previous three years compared to six percent for Canadian-born families.”
Arseneau suggests Canada’s immigration policy is unique in both its aggressiveness and its penchant for ‘economic’ immigrants.
“Moreover, immigration is more concentrated in the 25- to 44-year-old age group than ever before. The growth or contraction of this cohort, crucial for household formation, correlates perceptibly with divergences among countries in housing asset prices since 2008,” he says. “In every country, including Canada, in which this cohort grew more than seven percent from 2008 to 2018, home prices rose at least 60 percent over the same period.”
Canada will continue to attract international immigration. The government increased its expectations from 300,000 in 2017 to 350,000 in 2021.
“Statistics Canada projects that the 25- to 44-year-old cohort will grow 6.9 percent over the next 10 years, keeping the country in an excellent relative position,” says Arseneau. “In other words, the vigour of the Canadian housing market is soundly based and set to continue confounding the skeptics.”
Copyright Postmedia Network Inc., 2020
