In a significant shift in Canadian immigration policy, the federal government has announced plans to reduce the country's population growth over the next few years, primarily by reducing the number of temporary residents (TRs) coming to Canada. This change is expected to have varying impacts across the country, with British Columbia (BC) and Ontario—two provinces that rely heavily on temporary residents—likely to experience the most noticeable effects. BMO Capital Markets has outlined how these changes will impact the real estate markets in these regions, offering key insights for homebuyers, renters, and investors alike.
The Impact of Immigration Changes on BC & Ontario Real Estate
In the third quarter of 2024, BC and Ontario had some of the highest shares of temporary residents relative to their overall populations—9.3% and 8.5%, respectively. These regions are set to bear the brunt of the federal government's new immigration targets, which aim to reduce the number of TRs, including international students and temporary foreign workers (TFWs).
BMO Senior Economist Robert Kavcic explains that provinces with the largest inflow of TRs are the ones most likely to see the biggest impact. “Immigration target changes are likely to weigh heavier in British Columbia and Ontario over the coming three years,” Kavcic notes, emphasizing that both provinces exceed the national target for TRs, which is set at 5%.
In particular, BC has the highest share of TFWs—temporary foreign workers who play a significant role in the economy, particularly in industries like agriculture, hospitality, and construction. However, recent policy changes will tighten the issuance of TFW permits, with a specific focus on low-wage workers. This means that BC, which currently hosts 4.8% of all temporary foreign workers in the country, could see a slowdown in population growth tied to this group. Ontario, too, is expected to feel the effects, though not as heavily as BC.
Shelter Costs in BC & Ontario Likely to Moderate
So, what does this mean for shelter costs in these provinces? According to Kavcic, we can expect to see downward pressure on housing prices, particularly in BC and Ontario, where the combination of high demand from temporary residents and supply shortages has driven up prices in recent years.
“Rental markets in Ontario and B.C., which have a pipeline of supply coming to market, will also likely see their demand curves impacted most,” Kavcic points out. As a result, rental prices in major cities like Vancouver and Toronto could see a decrease in the short term, with lower rents potentially becoming a reality as the influx of temporary residents slows. This trend may also contribute to cooling housing starts, which have been at historically high levels in these provinces.
The slowdown in immigration could help to ease the intense demand pressure that has pushed shelter costs to unsustainable heights in cities like Vancouver and Toronto. With a smaller pool of renters and potential buyers, both home prices and rental rates in these markets may stabilize or even decline, offering a much-needed relief for those struggling to enter the market or find affordable rental options.
A Buffer for Other Provinces: Atlantic Canada & Alberta
Not every part of Canada will feel the brunt of the immigration changes equally. Provinces like Alberta and Atlantic Canada, which have a lower proportion of temporary residents, are expected to experience a more muted impact. These regions are also benefiting from strong interprovincial migration, with young adults moving away from expensive housing markets like BC and Ontario in search of more affordable options.
As a result, Alberta and Atlantic Canada could see continued population growth and rising demand for housing, albeit at a slower pace compared to BC and Ontario. In fact, some cities in these regions have already seen considerable price increases as more Canadians from higher-cost provinces like Ontario and BC make the move west or east in search of more affordable housing.
The Bigger Picture: Interprovincial Migration and Buyer Psychology
In addition to the reduction in temporary residents, the broader trend of interprovincial migration is also shaping Canada’s real estate market. Young adults, particularly those in their 20s and 30s, have been fleeing expensive provinces like BC and Ontario for cities in Alberta and Atlantic Canada, where home prices are more reasonable and job opportunities are growing.
As the gap between the high-cost cities and their more affordable counterparts narrows, the incentive for interprovincial migration could diminish. This could shift buyer psychology, making it less likely that Canadians will continue to flee expensive cities if the cost of living in those cities becomes more manageable.
In BC and Ontario, the cooling of demand for both rental and owned homes may help bring prices down, providing some relief for those who have been priced out of the market in recent years. On the flip side, regions experiencing a rise in demand—like Alberta and Atlantic Canada—could see a continuation of the affordability pressures that have been building over the past few years.
Conclusion: What This Means for Homebuyers and Renters
The Canadian government’s decision to reduce the number of temporary residents coming into the country is likely to have a significant impact on the real estate markets in BC and Ontario. For renters and homebuyers in these provinces, the immediate future could bring some relief as slower population growth puts downward pressure on both rental rates and home prices.
For those in regions with lower concentrations of temporary residents—like Alberta and Atlantic Canada—housing markets could remain relatively resilient, though interprovincial migration trends will still play a key role in shaping demand.
As always, it’s important for prospective buyers and renters to stay informed about changing policies and shifting market conditions. For those currently in BC or Ontario, it might be a good time to keep a close eye on rental and housing trends, as the next few years could offer new opportunities to enter the market at a more affordable price point.
The evolving dynamics of Canadian immigration and the real estate market underscore the importance of understanding the broader economic forces at play, especially when it comes to one of the most fundamental aspects of life—finding a home.
