News: Immigrants Fuel Overheated Real Estate Sector & Campaigns to Block Development

In this week's Industry News (Week of 3 Jan 2022).

Next wave of immigrants likely to fuel an already overheated real estate sector | The Globe and Mail After a frenetic 18 months when Canadians pushed up home prices in a quest to ride out the pandemic in comfort, another influx of buyers is set to provide more fuel to the overheated real estate market. The federal government has increased its annual immigration targets to the highest levels on record, creating the conditions for a surge of new permanent residents, which Canada desperately needs to fill job vacancies. These new immigrants will add to the country’s population and immediately boost the need for housing in major job centres and nearby cities. “Canada’s strong population growth is a factor driving our home prices upward at a faster pace than in many other economies,” said Bank of Montreal chief economist Douglas Porter, who analyzed the relationship between population growth and home prices in 18 developed countries. One reason immigration may be pushing up Canadian home prices is that Canada’s policies cater to newcomers with wealth and job skills. Many new permanent residents arrive with hefty bank accounts, or with enough professional expertise to make money quickly. And, like anyone else with means, they buy real estate. New research from Statistics Canada suggests that in many cases it’s pre-existing wealth, not Canadian income, that is behind pricey real estate purchases by immigrants. The disparity in the amounts spent by low-income immigrants and Canadian-born buyers suggests that the newcomers were relying on money not earned in Canada. The actual sources of the funds are unknown. CHSP has said the immigrant wealth could have been income earned previously in Canada or abroad, or income that was earned by others or underreported. Canada’s six largest metropolitan areas – Toronto, Vancouver, Montreal, Edmonton, Calgary and Ottawa – used to be the top destinations for immigrants. But that has been changing. In 2002, Canada’s largest cities took in 88 per cent of the country’s immigrants and non-permanent residents. In 2019, the proportion was just 68 per cent, according to Canada Mortgage and Housing Corp. Over that same period, net international migration to those cities grew by 43 per cent. But in the rest of Canada it soared by 370 per cent, with particularly strong growth in Ontario locations such as Niagara, London, Kitchener-Waterloo and Cambridge. Today, there is an acute shortage of housing in those smaller cities. The federal immigration target for 2021 was 401,000 new permanent residents. The goal for 2022 is 411,000. For 2023, it’s 421,000. By comparison, the number of new permanent residents admitted to the country in 2019 was 341,180. Anthony Passarelli, a CMHC senior analyst, said that if immigration reaches these record-high levels and Canada doesn’t respond by increasing its housing supply, the effects on the housing market could be noticeable. “We will likely go through a similar situation, where you see another price surge and the ripple effects of people getting priced out of the larger population centres and moving further out,” he added. Asked whether Canada should slow the pace of immigration until the country has enough affordable housing, BMO’s Mr. Porter said: “I suspect policy will be little swayed by housing market concerns. Having said that, at the very least the impact on housing should be taken into consideration when determining immigration targets.” See full article here.

Angry NIMBYs ("Not In My Backyard"-ers) are making Canada's housing shortage worse with campaigns to block developments | National Post It’s been estimated that one million new homes will be needed over the next decade in Ontario alone to meet demand, which includes the continuing immigrant influx. A proposal to turn one house into two is all it took to transform the quiet Toronto neighbourhood of St. Andrew-windfields into a battlefield. Neighbours flooded local authorities with letters pleading to be saved from the “lot division nightmare,” denouncing it in all caps and insinuating the dangers it could pose to local schoolchildren. They hired a lawyer, commissioned a planning study, and enlisted their city councillor to stop the project. The crux of the opposition was that homes in St. Andrew-windfields are large, and the two that Farrokh Zahedi and his wife proposed to build in place of their current one were small. This, the neighbours charged, would negatively alter the neighbourhood’s character. That such a minor thing — the addition of a single house in a city of nearly 7 million people — could cause such an uproar illustrates why Canada’s housing market, already one of the world’s most expensive, is almost certain to get even pricier in 2022 and beyond. The country’s population is booming. It’s growing at twice the rate of the U.S. and faster than any other Group of Seven nation. Most newcomers land in a handful of large cities, and Prime Minister Justin Trudeau’s government is promising to boost immigration levels even higher. Canada simply needs more houses. But local governments are often too feeble to overcome opposition to even minor building projects such as the Zahedis’ The roots of Canada’s housing dysfunction lie in provincial and city governments that don’t have a strategy for dealing with the immigrant influx and are all too easily swayed by residents’ groups opposing greater density. The core city of Toronto, which is denser than suburbs, still has a population density of less than half of New York City’s Mike Moffatt, an economist at Ontario’s Western University, projects that 1 million new homes will be needed over the next decade in Ontario alone. Most experts agree hitting that number will mean major reforms to planning rules. Yet proposals to allow denser housing like low-rise apartments in more of Toronto and Vancouver — Canada’s two most expensive cities for housing — are still in the consultation phase, with no recommendations for action expected until at least the middle of next year. “It’s the classic Canadian problem, where we have three levels of government involved that are not co-ordinating with each other,” said Moffatt, who’s also senior director of policy and innovation at the Smart Prosperity Institute. See full article here.

---

Konfidis is pleased to share our weekly real estate investing industry news piece herein. We love connecting with our members. Reach out with your questions to hello@konfidis.com.

Shael Soberano, CFA Konfidis Inc. Chief Investment Officer

Ready to start the process of buying a real estate investment property?

Try out Konfidis, we've built a product that does the search for you. We've developed a simple way to invest using big data, cutting-edge technology, plus our team of experts to help you outperform the market.

Talk to us today to receive our recommended investment properties.

Talk to Us