News: Opening Doors to More Immigrants & Ontario's Grass Ceiling

In this week's Industry News (Week of 13 Dec 2021).

Canada opens door to immigrants, adding fuel to hot housing market | Reuters While immigration may further stoke housing demand, Canada is counting on new residents to boost economic growth and fill labour shortages. Canada hopes more immigration can boost economic growth and allay a worsening post-pandemic labour shortage, but new migrants could pour gasoline on that red-hot housing market that the central bank has warned was stoked by "a sudden influx of investors." Prime Minister Justin Trudeau’s administration is on track to meet this year’s goal of 401,000 new permanent residents and is set to revise up next year’s target of 411,000, a government source said. Canada’s successive governments have relied on immigration to drive economic growth in the face of a declining fertility rate, which hit a record low last year. With the pandemic triggering early retirements among aging Canadians, attracting immigrants has grown more important. Also, the country targets high-skilled immigrants who tend bring in money and earn enough to compete for desirable housing. "It is a conundrum," Stephen Brown, senior Canada economist at Capital Economics, said of the effect of immigration on housing costs. Still, ongoing construction and the need for labour justify more immigration. Canada has reached a point where the labour force will "flatline" without immigration, Brown said. See full article here.

For housing, Ontario’s Greenbelt creates a grass ceiling — why Greenbelt development is essential to Toronto's future | National Post The last six years have seen the average price of a single-family, detached home increase by $300,000. In parts of Canada, the median price of such homes has surpassed $1 million for the first time. In many parts of the country, the problem is the absence of land to support a growing population. With an influx of new immigrants, as well as internal migrants from rural Canada, many Canadian cities are growing rapidly. Yet, much of the land within their municipal boundaries has already been developed and zoned — for residential, commercial and recreational purposes. It obviously would be unreasonable to build affordable housing complexes over parks and destroy the quality of life for residents. The problem is basic economics: more people exert more demand for a limited supply of land. Cue the liftoff of prices. Our cities need room to grow to a size commensurate with their larger populations. In the Greater Toronto Area, Canada’s largest, densest metropolitan area, the Greenbelt makes this impossible. Established in 2005 by Premier Dalton Mcguinty’s Liberal government, the Greenbelt is an environmental reserve intended to protect forests and farmland from urban development. At two million acres, it is almost half again as big as Prince Edward Island. Development is prohibited on this land. Though some highways, railways and homes were built before the Greenbelt was established, for all practical purposes, it is idyllic land frozen in time. That creates the problem: as the GTA’S population grows, Greenbelt regulations mean land close to the city cannot be repurposed to housing. Because the city can’t grow outward, land values and the cost of living within the region soar. As a result, Toronto is now infamous as one of the least-affordable housing markets in the world, where median house prices are nearly 10 times the median annual income. This has increased homelessness and created financial hardships for newcomers and young people trying to enter the middle class. But this is a truth nobody dares utter. Greenbelt reform is the biggest taboo in Ontario politics. Legions of middle-aged and baby-boomer homeowners who moved into the Greenbelt decades ago have been quick to mobilize against any hint of relaxing regulations. See full article here.

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Shael Soberano, CFA Konfidis Inc. Chief Investment Officer

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