On December 23, the federal government announced that Canada had welcomed the largest number of new immigrants in a single year in the country’s history.
Sean Fraser, who is the Minister for Immigration, Refugees and Citizenship, said in a press release that the government had reached its target of 401,000 permanent residents by 2021.
The statement noted that the number surpassed the previous record from 1913.
How did the government derive this “historic achievement”?
The statement explained that Canada was “making the most of the talent already within our borders.”
“The majority of these new permanent residents were already in Canada on temporary status,” the statement said.
The number of 401,000 is certainly huge.
And as CIBC Economics notes in a new paper, this development has “significant implications for the labor market and housing demand.”
Economist Benjamin Tal authored the article, “Covid Immigrants – Implications for Labor Market and Housing,” which was published Thursday, January 20.
Tal noted that 70% of “newcomers” were not actually new.
“That is, these new permanent residents lived in Canada as temporary residents,” the economist wrote.
“For them,” Tal continued, “becoming a permanent resident only meant a change of status, not a change of address.”
Many of them are young, well educated and have work experience in Canada.
This means that they are more employable or they can easily find a job.
For example, people in the economic class are “more easily employable in higher skilled and better paid occupations” because of their education and language skills.
In 2021, economic migrants were at a “record” number of 255,000.
There is also a significant number of temporary migrants who have become permanent residents under the so-called “Canadian Experience” category.
They include people with “Canadian work experience, as well as many people who applied to Canada and had temporary work visas (including international students on work visas).”
“Covid travel restrictions have kept many of these visa holders in Canada, contributing at least in part to the exponential increase in Canadian experience immigration ‘arrivals’ to Canada, from 30,300 in 2019 to approximately 135,000 in 2021,” Tal wrote.
What does this mean for the housing market, especially real estate in Vancouver?
New immigrants will soon be looking for a home.
Tal wrote that “the growing proportion of new immigrant young adults with experience in Canada may help to shorten the time between ‘arrival’ and buying a home.”
“Today, the assumption is that new immigrants buy a house, on average, five or six years after their arrival,” noted the CIBC economist.
Tal continued, “We suggest that since many of them were already in Canada before the status change, they might be able to buy a house sooner.”
Having well-paying jobs also means that new immigrants become homeowners more quickly.
Furthermore, Tal noted that the statistics “underestimate the actual formation of households due to immigration, and therefore the demand for housing”.
“Household formation is determined by translating population growth into the number of households using estimates of headship rates, or the number of households created from a given number of people,” he explained. .
Furthermore, “the growing number of new immigrants and their changing composition are helping to alleviate the labor shortage in Canada and help to limit wage inflation and, therefore, provide the Bank of Canada with sufficient justification to rise more slowly than the market expects”.
Tal was referring to the series of interest rate hikes expected in 2022, which will increase the cost of mortgages or loans for the purchase of a home.
The Bank of Canada has maintained a policy rate of 0.25% since March 27, 2020 in response to the COVID-19 pandemic
This level has kept interest rates low, which partly explains the strength in home sales in 2020 and 2021.
On January 17, the Canadian Real Estate Association released annual sales figures for 2021.
CREA reported that 666,995 residential properties changed hands last year.
“This was a new record by far, surpassing the previous annual record set in 2020 by just over 20% and standing 30% above the average of the past 10 years,” CREA said in a statement. A press release.
Meanwhile, the overall benchmark price for a Canadian home rose a “record 26.6% year-over-year in December.”
The 2021 market has been so busy that transactions from January to October 2021 have already exceeded 552,423 sales for the whole of 2020.
According to the government’s plan, Canada aims to welcome more immigrants.
The objectives are 411,000 in 2022 and 421,000 in 2023.