Changes to immigration programs and effect on Real Estate

Not a lot of Real Estate investors keeps track of Canadian immigration program, but they should. In the past Canada welcomed 200 000-250 000 people each year from all over the world. At least half of them (some sources claim up to 90%) called Ontario their new home. New immigrants were one of the top factors driving Real Estate up.

A typical immigrant rents for at least the first year, helping rental market to grow. As soon as immigrants are on the feet they prefer to buy own home, so we have more buyers on the market. But regardless if immigrant decides to rent or buy they increase demand for housing, driving Real Estate up.

If you noticed in the Spring Rental Report by CMHC net immigration into Ontario has “slowed sharply since 2010”. This is because government of Canada done quite a few changes to almost every immigration program, reducing number of qualifying immigrants. This is done to help bring people who have better chance of finding job in Canada. Federal Skilled Worker Program took the most hit in the last couple of years. Other programs that were changed reducing immigrant’s flow were investors and family class.

Many potential applicants were hopping for new rules and quotas as of July 1^st, 2012 but instead government of Canada announced that for now they are closing Federal Skilled Worker Program (main source of immigrants) until better selection criteria are developed.

For the Real Estate investor this is very significant because we are losing about 100 000 new renters in south Ontario. Combine this with less demand due to new CMHC rules, rising prices etc. and you might have a perfect storm for prices to take a turn. What is even more important is the fact that this is a long lasting effect. Even if new program is introduced 6 months down the road, it will take over a year for new immigrants to arrive, start renting and a few years before they start buying.

Another point to remember is why Canada had immigration program in the first place. Baby boomers are not getting any younger. More and more of them are retiring and there are less and less workers left to take their place. Immigrants were a source of work ready, grown up and trained professionals. Less workers means less taxes paid and we all know how this could end.

Of course I might be wrong (wouldn’t it be great if I am?), what do you think? Share your thoughts what impact new immigration rules will have in the Real Estate.