Canada's housing market, already strained by rapid population growth, is facing even more pressure due to a surge in the working-age population in the first four months of 2024. Statistics Canada data shows a dramatic increase of 411,400 people compared to the same period in 2023. This represents a 47% increase and nearly quadruple the average growth experienced between 2007 and 2022.
Economists are concerned about the impact this will have on affordability, particularly for first-time homebuyers. The already limited housing supply is expected to be further strained by the influx of new residents, putting upward pressure on prices.
Factors Contributing to the Growth
Several factors are contributing to Canada's population boom. Immigration is a major driver, with major cities like Toronto, Vancouver, and Montreal experiencing significant growth. The federal government's recent measures to reduce immigration levels, such as cutting international student visas and capping temporary resident admissions, may not have a significant impact in the short term. Economists speculate that these announcements might have even spurred a short-term surge in applications as people rushed to enter Canada before the new policies take effect.
Impact on Housing Market
The Canadian Real Estate Association's recent sales data showed some positive signs for affordability, with slower sales leading to price stabilization and an increase in available homes. However, economists believe this trend is unlikely to continue in the face of accelerated population growth. The existing affordability challenges for first-time homebuyers are expected to worsen.
Interest Rates and Inflation
The Bank of Canada is anticipating rate cuts in the latter half of 2024. However, the population surge creates a complex situation. While lower interest rates might improve affordability, the increased demand for rental units could push rents even higher. Rising rents would lead to an increase in the Consumer Price Index (CPI), further fueling inflation.
Long-Term Effects
Economists at the National Bank predict a working-age population growth of 3% for 2024, exceeding the 2.3% recorded in 2023. While they expect the explosive growth witnessed in the first few months to taper off, the impact of the population boom in 2023 and 2024 is likely to be felt for several years to come.
The Road Ahead
The federal government acknowledges the housing challenges and is working on aligning immigration policies with measures to address housing and infrastructure issues. Collaboration between all levels of government is crucial to develop a sustainable approach to immigration and housing in Canada.
What it Means for You
The current situation presents both challenges and opportunities for the real estate market. If you're considering buying a home in Canada, be prepared for a competitive market and potentially higher prices. Working with a qualified real estate agent from Coldwell Banker Horizon Realty can help you navigate the complexities of the market and find the right property for your needs.
Coldwell Banker Horizon Realty can assist you with buying or selling a home in Kelowna and surrounding areas. Our experienced and knowledgeable agents can guide you through the process and ensure a smooth transaction. Contact us today to discuss your real estate needs.
