Following gains of 209,000 people (+0.6% q/q) in Q3/19, 97,000 (+0.3%) in Q4/19 and 81,000 (+0.2%) in Q1/20, Canada’s population increased by a mere 25,000 (+0.1%, a record low percentage increase) in the second quarter of this year, due almost entirely to measures restricting entry into the country of international migrants who might be carriers of COVID-19.
Drop in net non-permanent migration shrinks rental demand
International border restrictions severely depressed the inflow of both permanent and non-permanent immigrants. However, it was non-permanent immigrants who were the most heavily impacted. After totalling 191,000 in 2019, net non-permanent migration dropped to 6,500 in the first quarter of this year and contracted by -25,000 in the second. This precipitous drop was mainly due to a retreat in individuals holding study permits, temporary work permits and asylum claimants. Since non-permanent residents are granted the right to live in Canada on a temporary basis, they tend to rent accommodation or stay in corporate or camp housing.
Among the 10 provinces, Ontario experienced the largest net outflow of non-permanent residents in the second quarter (-11,000) and the majority were from the Greater Toronto Area. Given the impact of this sharp contraction in non-permanent residents, plus the effects of a significant increase in pandemic-related job losses among younger workers, a large proportion of whom tend to rent, it is not surprising that Urbanation Inc. recently reported the GTA’s rental vacancy rate in Q3/20 was 2.4%, three times greater than in Q3/2019.
Average monthly rents for units in buildings at least a year old that were put on the market in this year’s Q3 declined by -5.8% y/y. Urbanation does point out, however that the average size of units up for rent in Q3/20, at 740 square feet, was down -3.6% from 767 square feet in Q3/19.
The exodus of non-permanent residents (-9,700) from British Columbia was the second highest in the country. However, average rents in Vancouver are down by just -2% y/y. This suggests that the negative impact of the outflow of 10,000 non-permanent residents was largely offset by an exceptionally large jump of 8,000 in net interprovincial migrants.
Admissions of permanent residents down in all provinces
While the COVID-19-driven border shutdown has reduced the net number of permanent immigrants seeking to enter or re-enter Canada, it did not cause them to crater as severely as non-permanent residents. After posting gains of 104,000 in Q3/19, 77,000 in Q4/19, and 69,000 in Q1/20, the net number of permanent immigrants dropped to 34,300 in Q2 of this year. Given that over the past two years, more than forty-five percent of the 560,000 permanent residents admitted to Canada settled in Ontario, it’s no surprise that the province experienced the largest absolute reduction in admissions of permanent residents in the second quarter.
However, in percentage terms, net admissions into Saskatchewan retreated by -55.3% q/q, closely followed by Quebec (-55%), Newfoundland (-49%), and Manitoba (-48%). Net permanent immigration was affected the least in Nova Scotia, which had the smallest quarterly decline (-11.8%), and in British Columbia, where it slipped by -29.4%.
While the very sharp contraction in net non-permanent residents appears to be contributing to a significant softening in rental demand, the slowdown in the inflow of permanent immigrants appears to have done little to dampen sales of new or existing single-family homes, which have benefitted from a rebound in full-time employment and near record-low mortgage interest rates.
Based on monthly data sourced from Immigration, Refugees and Citizenship Canada, the volume of non-permanent and permanent immigrants arriving in Canada has picked up after hitting a record low in April. However, the fact that over the past four months the net number of temporary immigrants is down by 46% compared to the same period a year earlier, and given that a second wave of COVID-19 has appeared on the scene, it seems likely the demand for rental accommodation will be depressed throughout much of 2021. Despite a moderate increase over the past four months, the volume of net permanent immigrants to Canada is down by 60% compared to the same period a year earlier.
Second COVID-19 wave will dampen migration through 2021
Looking ahead, given the recent onset of a second wave of COVID-19 that is hitting all provinces except Nova Scotia, Prince Edward Island, and Newfoundland and Labrador, it appears likely the authorities will keep the international border closed well into the first half of next year. This prospect was reinforced by the recent evidence of a second COVID-19 wave in Europe and the risk that other countries will experience similar upswings in coronavirus cases.
In light of these developments and despite the federal government’s recently announced plans to bring newcomers to the country even as borders remain closed, we expect net international migration to stay depressed, thereby significantly dampening demand for both rental and ownership housing throughout 2021.
John Clinkard has over 35 years’ experience as an economist in international, national and regional research and analysis with leading financial institutions and media outlets in Canada.
Canada: Net Change in Permanent Immigrants vs Net Change in Non-permanent Residents
Chart: ConstructConnect – CanaData.