On December 23 last year, the federal government announced that Canada has welcomed the most number of new immigrants in a single year in the country’s history.
Sean Fraser, who is the Minister of Immigration, Refugees and Citizenship, stated in a media release that the government met its target of 401,000 permanent residents in 2021.
The release noted that the number surpassed the previous record from 1913.
How did the government pull this “historic achievement”?
The release explained that Canada “made the most of the talent already within our borders”.
“The majority of these new permanent residents were already in Canada on temporary status,” the release stated.
The number of 401,000 is certainly a huge one.
And as CIBC Economics notes in a new paper, this development carries “important implications for the labour market and housing demand”.
Economist Benjamin Tal wrote the paper titled “The Covid immigrants—Implications for the job market and housing”, which was released Thursday (January 20).
Tal noted that 70 percent of the “new arrivals” were not actually new.
“That is, those new permanent residents have lived in Canada as temporary residents,” the economist wrote.
“For them,” Tal continued, “becoming a permanent resident meant only a change in status, not a change of address.”
Many of them are young, well educated, and have Canadian work experience.
This means that they are more employable or can find jobs easily.
For example, those in the class of economic immigrants are “more readily employable in more skilled and higher salaried occupations” because of their education and language skills.
In 2021, economic migrants numbered a “record-high” 255,000.
There are also a significant number of temporary migrants who became permanent residents through the so-called “Canadian Experience” category.
They include people with “Canadian work experience, as well as many who applied within Canada and had temporary work visas (including international students with work visas)”.
“Covid travel restrictions kept many of these visa holders in Canada, contributing at least in part, to the exponential rise in Canadian Experience immigration ‘arrivals’ in Canada from 30,300 in 2019 to an estimated 135,000 in 2021,” Tal wrote.
What do these mean for the housing market, especially Vancouver real estate?
The new immigrants will be out house hunting soon.
Tal wrote that the “rising proportion of young adult new immigrants with Canadian experience might work to shorten the length of time between ‘arrival’ and home purchasing”.
“Today, the assumption is that new immigrants purchase a home, on average, five or six years after arrival,” the CIBC economist noted.
Tal continued, “We suggest that given that many of them were already in Canada before the change in status, they might be in a position to purchase a home earlier.”
Being in high salaried jobs also means that the new immigrants have a faster path to owning homes.
In addition, Tal noted that statistics “underestimate actual household formation due to immigration, and therefore housing demand”.
“Household formation is determined by translating population growth into the number of households by using estimates of headship rates, or the number of households created from a given number of persons,” he explained.
As well, the “growing number of new immigrants and their changing composition is helping to ease the labour shortage in Canada and is working to limit wage inflation and therefore provide the Bank of Canada with enough justification to hike more slowly than what’s priced in by the market”.
Tal was referring to the expected series of interest rate hikes in 2022, which will increase the cost of mortgages or loans for home purchases.
The Bank of Canada has maintained an overnight rate of 0.25 percent since March 27, 2020 in response to the COVID-19 pandemic
This level has kept interest rates low, which partially explains robust sales of homes in 2020 and 2021.
On January 17, the Canadian Real Estate Association released annual sales figures for 2021.
The CREA reported that 666,995 residential properties changed hands last year.
“This was a new record by a large margin, surpassing the previous annual record set in 2020 by a little more than 20%, and standing 30% above the average of the last 10 years,” CREA stated in a media release.
Meanwhile, the aggregrate benchmark price of a Canadian home went up by a “record 26.6% on a year-over-year basis in December”.
The 2021 market was so busy that transactions from January to October 2021 already exceeded the 552,423 sales for all of 2020.
Based on the government’s plan, Canada aims to welcome more immigrants.
The targets are 411,000 in 2022, and 421,000 in 2023.