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Sal Guatieri: How Canada’s immigration policy is affecting housing affordability

Commentary

A house that sold for more more than the listing price in West-end Toronto, Sunday, April 24, 2022. Graeme Roy/The Canadian Press.

On April 1, Canada’s population topped 41 million for the first time ever. The increase of almost a quarter million people was similar to the prior quarter. The yearly rise of 1.27 million was the most on record, while the percentage gain of 3.2 percent is the largest since 1958 and more than double the historical mean. Net international migration of 1.24 million drove almost all the rise, with two-thirds (828,000) propelled by temporary immigration.

If, as planned, the federal government slashes the number of temporary immigrants from 6.8 percent of the population to 5 percent within three years, then overall growth will slow to around 1 percent. A growing population propelled by permanent immigration targets of half a million per year will still support the housing market, but in a much more sustainable manner. Builders will have a decent chance of keeping up with household formation, reducing the risk of markets overheating and prices overshooting income growth.

Poor affordability, namely in B.C. and Ontario, is not (yet) having a serious effect on international migration. Ontario’s population grew 3.5 percent in the past year and B.C.’s rose 3.3 percent, both much faster than usual and still leading all provinces except for Alberta, whose population exploded 4.4 percent, the most since 1981. Ontario and Alberta’s population growth is about double the long-run norm. All provinces are attracting more international migrants than usual, even pricey Ontario (net 93,000) and B.C. (40,000), with Alberta (33,000) punching above its weight.

But regional affordability differences are influencing where migrants, including longtime residents, eventually end up. The biggest increases in population relative to historical norms are in Saskatchewan, Manitoba, Quebec, and three Atlantic provinces. What do all six regions have in common? Still-decent affordability. The sole exception is Newfoundland and Labrador with still-subdued population growth of 1 percent, though that’s twice the norm.

A total of 356,000 people moved between provinces in the past year, also more than usual. This is where differences in housing costs come to the fore. Ontario had a net outflow of 32,000 people, trending at the worst levels on record, while B.C. lost 10,000 folks to other provinces.

The hands-down winner of the interprovincial migration sweepstakes is Alberta with a net gain of 53,000, tracking the most on record. And it’s no coincidence that the biggest contributor to this gain is people leaving B.C. and Ontario. More Canadians are also moving to Atlantic Canada. While Newfoundland and Labrador did see a small net outflow, this followed a rare inflow in the prior two years. Quebec, Saskatchewan, and Manitoba also lost residents to other provinces, but Quebec’s net outflow was much smaller than usual.

Migration into affordable regions might continue for a while. As we discussed in last week’s Pathways to Affordability for Canada’s Housing Market, barring a steep decline in home prices or interest rates, restoring affordability in B.C. and Ontario could take several more years. Not surprisingly, regions where people are drawn to inexpensive housing are still seeing price gains, despite high interest rates. New Brunswick leads the way with benchmark prices up 11 percent year over year to May, followed by Alberta’s 9 percent advance.

By comparison, prices are up just 1 percent in B.C. and down 3 percent in Ontario. People are driving far or even flying to qualify these days, and their decisions to relocate could help narrow the wide gaps in regional affordability.

This post was originally published at BMO Economics.

Trevor Tombe: Ontario can easily add $4 billion a year to its economy—and all it takes is playing nice with the Western provinces

Commentary

Saskatchewan Premier Scott Moe and Ontario Premier Doug Ford shake hands during press confererence at Queen’s Park in Toronto, October 29, 2018. Christopher Katsarov/The Canadian Press.

Cut red tape. Boost productivity. Foster economic growth. Improve worker mobility.

Ontario has a chance to do all of these and more.

All it takes is joining a little-known (but economically important!) trade agreement with Canada’s four Western provinces: the New West Partnership.

Canada’s productivity and growth challenges are well known. And many ideas have been proposed to address it, from tax reform to easing regulatory burdens to leveraging our natural resources. But the ability of individuals and businesses to trade across provincial boundaries is perhaps the lowest-hanging fruit of them all.

This isn’t news to avid readers of The Hub. Recent articles from Ryan Manucha, Fen Osler Hampson and Tim Sargent, Brenda Frank and Etienne Rainville, and others have made this very point.

At a time of deglobalization and uncertainty abroad, improving our internal market—which accounts for one-fifth of Canada’s economy, or over $520 billion per year—could boost the economy and hedge our risks. And there’s room to grow.