Canada's housing market, which had been quiet for the first half of the year, has bounced back in recent weeks. The Toronto Real Estate Board reported record sales in June, while activity in Vancouver, Montreal and other urban centres is also strong. While most economists don't think the current boom will last, it seems the worst of the housing slide may be over.
What's behind the increased sales activity? Experts point to low interest rates and more affordable prices, but in the longer term, the role of immigrants getting into homeownership will be a major factor.
A study of Statistics Canada data and Census information by Canada Mortgage and Housing Corp. (CMHC) in 2007 found that "the degree of homeownership attained by immigrants just six months after landing in Canada was impressive," says the federal housing agency. This year, CMHC released an update to that report to study the results more closely.
It notes that in the first four years after arriving in Canada, about 68 per cent of survey respondents were in the labour market, and that "there was a marked increase in the purchasing power of newcomers over their first four years in Canada." The ratio of survey respondents owning homes went from less than one in five after about six months to more than half by the end of four years. The survey notes that this boost came during a time of escalating prices during a housing boom.
Scotiabank's senior economist Adrienne Warren says, "Homeownership tends to increase the longer one has lived in Canada, with the majority of new arrivals first settling into rental accommodation. Over time, immigrant families make the move to homeownership, at rates similar to the Canadian-born population." But in a recent analysis, Warren says, "Between 2001 and 2006, the homeownership rate grew for all immigrant groups, regardless of how long they had resided in Canada. The biggest increase was among those living in Canada for less than 10 years. As recent immigrants to Canada make the transition from renter to owner, they will increasingly drive housing demand."
Warren says the rise in immigrant homeownership has had a huge impact on the demand for condominiums. The majority of new Canadians settle in the largest cities (Toronto, Montreal and Vancouver) where condos are plentiful and the most affordable housing choice. Immigrant homeowners are more likely to buy a condo than native-born Canadians, says Warren's report. "The younger average age of immigrants relative to the general population and their much higher likelihood of living in major urban centres also favours condominium living," she says.
"Condominiums account for more than one-quarter of the increase in the number of Canadian homeowners between 2001 and 2006."
Not all immigrants have an easy time finding housing, says the CMHC report. "A number of newcomers continued to struggle with problems of affordability, and difficulties finding housing." says the report. "There are several groups who experience such problems more consistently than others, notably 'refugees' and immigrants self-identifying as black, Arab, and West Asian." In contrast, groups identified as South Asian and Southeast Asian had an "extraordinary degree" of homeownership, says the report.
Most immigrants who entered the country classified as "skilled workers" started out as tenants.
"However, their propensity to purchase a home was the highest of any group, and they had the lowest rate of homeownership loss over the course of the survey of any group," says CMHC. "As might be expected, 'refugees' had the lowest rate of homeownership … an outcome that was associated with below-average earnings and family income."
Although 69 per cent of immigrants to Canada settled in Toronto, Montreal or Vancouver from 2001 to 2006, Scotiabank says an increasing share are settling in the suburbs. A growing group (28 per cent) are also settling in smaller cities, including Calgary, Ottawa-Gatineau, Edmonton, Winnipeg, Hamilton and Kitchener, Ont. Less than three per cent of immigrants settle in a rural area.
"Given Canada's aging population and relatively low fertility rates, longer-term household formation and housing needs will be largely determined by immigration," says Warren. "Using standard assumptions regarding immigration, fertility and mortality rates, the share of Canada's population growth coming from immigration could rise to three-quarters a decade from now, up from 60 to 65 per cent today, and almost all by 2030."