Government of Canada reduces immigration levels
By Tony Irwin, Interim President, CFAA
On October 24, 2024, Marc Miller, Minister of Immigration, Refugees and Citizenship, announced the 2025–2027 Immigration Levels Plan, which will pause population growth for the next few years. This plan includes controlled targets for temporary residents (e.g., international students, foreign workers) and permanent residents. Canada’s population grew to 41 million in April 2024, with immigration accounting for almost 98 per cent of this growth in 2023.
The 2025–2027 Immigration Levels Plan is designed to alleviate pressures on housing, infrastructure, and social services that are in part due to previous immigration levels. Reducing immigration levels will help to reduce the housing supply gap by approximately 670,000 units by the end of 2027. The plan is expected to produce marginal population decline of 0.2 per cent in both 2025 and 2026, with population growth returning to 0.8 per cent in 2027. These forecasts account for the announced reduction in targets across multiple immigration streams over the next two years. It will also reduce expected temporary resident outfows resulting from the 5 per cent target, natural population loss, and other factors.
As compared to the 2024–2026 Immigration Levels Plan, which was announced last year, the new plan will change its permanent resident targets as follows:
• Decreasing from 500,000 permanent residents to 395,000 in 2025
• Decreasing from 500,000 permanent residents to 380,000 in 2026
• Targeting 365,000 permanent residents in 2027
The Immigration Levels Plan will also support reducing temporary resident volumes to 5 per cent of Canada’s population by the end of 2026. Following the temporary resident reduction measures announced in September and over the past year, Canada’s temporary population will decrease over the next few years, with more temporary residents either becoming permanent residents or leaving Canada.
Canada’s temporary population is expected to:
• Decline by 445,901 in 2025
• Decline by 445,662 in 2026
• Increase by 17,439 in 2027
The reductions in temporary residents are the result of a cap on international students and tighter eligibility requirements for temporary foreign workers. The goals are to decrease volumes and improve the quality of the temporary resident programs. The updated plan will help provinces and territories to align their capacities and allow the population to grow at a sustainable pace.
The 2025–2027 Immigration Levels Plan includes the following additional measures:
• Transitioning more existing temporary residents to permanent residents, who represent more than 40 per cent of overall permanent resident admissions in 2025
• Focusing on long-term economic growth and key labour market sectors, such as health and trades
• Strengthening Francophone communities outside Quebec and supporting their economic prosperity
Bank of Canada lowers policy rate by 50 basis points
On October 23, the Bank of Canada reduced its target for the overnight rate to 3.75%, with the Bank Rate at 4% and the deposit rate at 3.75%.
The Bank expects the global economy to expand at about 3% over the next two years. Canada’s economy grew at around 2% in the frst half of 2024, with growth of 1¾% expected in the second half. Consumption has grown but is declining on a per person basis. The labour market remains soft, with unemployment at 6.5% in September. Population growth has continued to expand the labour force, although hiring has been modest. Wage growth remains high relative to productivity growth.
NATIONAL OUTLOOK
GDP growth is forecast to strengthen over the projected time period, supported by lower interest rates. The Bank forecasts GDP growth of 1.2% in 2024, 2.1% in 2025, and 2.3% in 2026. CPI infation has declined from 2.7% in June to 1.6% in September. Infation in housing costs remains high but has begun to ease. The drop in global oil prices has led to lower gasoline prices. The Bank’s preferred measures of core infation are now below 2½%.
Election recaps
British Columbia
It took about a week after the polls closed to complete the recounts, but the BC NDP have secured a thin majority. David Eby is the returning premier of BC. Elections BC released the fnal ballot count results on Monday: the NDP won 47 seats, the BC Conservatives won 44 seats, and the BC Greens won two seats. A majority requires 47 seats. As of this writing, judicial recounts are required in SurreyGuildford and Kelowna Centre, as the margin of victory is less than 1/500th of the number of votes cast.
Saskatchewan
The Saskatchewan Party secured its ffth straight majority in winning the provincial election, with Scott Moe returning as premier of Saskatchewan. The NDP made signifcant gains in Regina and Saskatoon, while the Saskatchewan Party dominated in rural ridings, as well as Prince Albert, Moose Jaw, and other small cities. The Saskatchewan Party won 34 seats out of 61, which is a decline from the previous election, compared to the NDP’s 27 seats.
New Brunswick
The New Brunswick Liberals won the provincial election, replacing the incumbent Progressive Conservatives. The Liberals won 31 seats, the Progressive Conservatives won 16 seats, and two seats went to the Green Party. Liberal leader Susan Holt made history in becoming the frst female premier in New Brunswick’s history. Blaine Higgs, the previous premier of New Brunswick, lost his seat and later stepped down as leader of the Progressive Conservatives.
OCT/NOV 2024
Nova Scotia
Nova Scotia is going to the polls on November 26. Tim Houston, premier and leader of the Progressive Conservatives, announced a snap election. This is a somewhat controversial move, as Houston introduced legislation three years ago that set July 15 as a fxed election date for the province. During a rally, Houston stated that an early election is required to address the high cost of living through investments in improving affordability and the housing crisis. He also wants to ensure the provincial election will not confict with a federal election.
Government unlocks federal properties for housing
On October 8, the Government of Canada identifed 14 new properties within its portfolio that have the potential for housing, which are actively being added to the Canada Public Land Bank. The government will turn these properties into housing through a long-term lease to support affordable housing and ensure public land stays public.
To date, 70 federal properties have been identifed as being suitable to support housing. This list will grow in the coming months, and have been added to the Canada Public Land Bank, launched in August 2024. The Canada Lands Company, in partnership with CMHC, issued a call for proposals for f ve properties located in Toronto, Edmonton, Calgary, Ottawa, and Montréal. The call for proposals in Toronto and Montréal closed on October 1, 2024, while the call for proposals for Edmonton, Calgary, and Ottawa will close on November 1, 2024.
The Government of Canada has received interest and feedback from provinces, territories, and municipalities, as well as developers, housing advocates, and Indigenous groups. This information will be used to develop and bring more properties to market starting this fall.
Government announces mortgage reform
On September 15, Chrystia Freeland, Deputy Prime Minister and Minister of Finance, announced several reforms to mortgage rules to improve mortgage affordability:
• The price cap for insured mortgages is Increasing from $1 million to $1.5 million, effective December 15, 2024. The price cap better refects the current housing market and will help more people to qualify for a mortgage with a down payment below 20 per cent. The insuredmortgage cap has not been adjusted since 2012.
• Eligibility for 30-year mortgage amortizations will be expanded to all frst-time homebuyers and all buyers of new builds, effective December 15, 2024. This will reduce monthly mortgage payments and help more people to buy a home. This rule includes purchases of condos.
• These measures build on the Canadian Mortgage Charter¸ announced in Budget 2024, which allows all insured mortgage holders to switch lenders at renewal without having to undergo another mortgage stress test.
Secondary suites and vacant lands
On October 8, Chrystia Freeland, Deputy Prime Minister and Minister of Finance, alongside JeanYves Duclos, Minister of Public Services and Procurement, and Terry Beech, Minister of Citizens’ Services, announced several measures to unlock more land for housing.
The federal government will provide technical guidance for lenders and insurers to offer mortgage refnancing for homeowners looking to add secondary suites to their homes, effective January 15, 2025. Combined with the Canada Secondary Suite Loan Program, it will now be easier to convert a basement into a rental apartment or a garage into a laneway home. To support these efforts:
NATIONAL OUTLOOK
• Homeowners will be able to refnance insured mortgages for secondary suites to access fnancing of up to 90 per cent of the home value, including the value added by the secondary suite(s), and amortize the refnanced mortgage for up to 30 years
• The mortgage insurance home price limit will be increased to $2 million for refnancing to build a secondary suite
The government also plans to conduct consultations on the taxation of vacant land. They will collect feedback from provinces, territories, and municipalities that want to impose vacant land taxes. This would incentivize landowners to build homes on this vacant land.
Poilievre plans to “axe the sales tax” on new home sales
On October 28, Conservative Party of Canada leader Pierre Poilievre announced that, should he become Prime Minister, he will remove GST on new homes sold for under $1 million for a maximum tax savings of $50,000 on a new home purchase. This would involve increasing the maximum home price threshold to $1 million from $450,000 and the refund to 100 per cent from the current 36 per cent. The tax cut will save $40,000 on a home selling for $800,000 and reduce mortgage payments by $2,200 a year.
To follow is a copy of the body of the press release:
Common Sense Conservative Leader Pierre Poilievre announced today that as Prime Minister he will axe the federal sales tax (or GST) on new homes sold for under $1 million, a tax cut that will spark 30,000 extra homes built every year. Poilievre will also push provinces to remove their sales tax from new home sales, which would save tens of thousands of dollars more for homebuyers.
The move comes after housing costs have doubled in the nine years of the NDP-Liberal government, rising faster than in any other G7 country. Back in October of 2015, the month before Justin Trudeau became Prime Minister, it took only 39 per cent of the median pre-tax household income to cover home ownership costs. Now, it takes nearly 60 percent. While it used to be normal for working class youth to buy homes, now 80 per cent of Canadians tell pollsters homeownership is only for the very rich and there are now 1,400 homeless encampments in Ontario alone.
In Ontario and British Columbia, government charges account for more than 30 per cent of the cost of a new home. The federal government takes the biggest share. In Ontario, about 39 per cent of the total taxes on a new home go to politicians and bureaucrats in Ottawa. One such tax is the GST, adding $50,000 in costs to a $1 million home.
The federal government currently provides a rebate for new housing. Builders or purchasers of newly constructed or substantially renovated homes receive a 36 per cent rebate on the value of a home up to $350,000, providing a maximum rebate of $6,300. This rebate is phased out for homes costing up to $450,000; no rebate is available for homes above this amount.
Common Sense Conservatives will fund this big homebuyers’ tax cut by eliminating $8 billion of bureaucratic programs that Liberals admit have not built a single home. Also, the tax cut will spark 30,000 extra homes built each year, generating more income for construction workers and businesses, and $2.1 billion of revenue for government.
Only Common Sense Conservatives will bring home Canada’s promise: that hard work earns a powerful paycheque that buys affordable food and homes in safe neighbourhoods.
OCT/NOV 2024
National economic update webinar
On October 22, 2024, CFAA hosted a complimentary webinar, “Economic Outlook with Benjamin Tal – Looking Towards 2025.” Benjamin Tal, Deputy Chief Economist at CIBC World Markets, is one of Canada’s foremost economic experts, and is known for his ability to break down complex economic trends and provide a clear, actionable forecast for the future. This webinar was geared to business leaders, investors, and rental housing professionals interested in what they could expect for the coming year.
In this webinar, Tal discussed the Bank of Canada’s efforts to bring infation down to their target rate of 2 per cent, and the costs of doing so. He stated the Bank of Canada would prefer to create a recession to slow down the economy, as it’s easier to address than infation.
“Bad news is good news, and I have plenty of good news for you today,” said Tal.
Tal stated that surging shelter costs are driven by higher interest rates. One third of CPI in Canada is shelter infation. Shelter infation does not include housing prices; it includes commissions to real estate agents, rental rates, and mortgage interest payments. Higher mortgage interest payments are disinfationary, as they slow down the consumer. Removing mortgage interest payments from infation puts the rate of infation below the desired target rate.
“The Bank of Canada raised interest rates to fght infation,” said Tal. “Higher interest rates are added to infation through higher mortgage interest payments. It’s like putting a humidifer and a dehumidifer in the same room and letting them go at each other. It doesn’t make any sense whatsoever.”
Tal wants the Bank of Canada to cut interest rates, and he believed they would cut the policy rate by 50 basis points (which happened recently, after the webinar). He stated Canada is currently in a per capita recession, as per capita GDP is falling at 2.5 per cent. Per capita GDP has fallen for f ve quarters in a row. Current Canadian per-capita consumer spending has reached similar levels as prior recessions. This is due to the population boom, which is a result of Canada’s aggressive immigration policy. Over the last two years, other countries had population growth below 1 per cent, while Canada achieved 3.5 per cent population growth.
“The housing crisis we are facing, the shortage in rentals we are facing, is a planning crisis,” said Tal. “It takes municipalities about ten years to acquire the land, service the land, create the infrastructure, and sell the land. Every municipality needs a plan from Statistics Canada about population growth.”
The problem is the numbers changed drastically. In 2013, Statistics Canada gave the municipalities a projection for what the population would be in 10 years. In 2023, the actual population was 1.5 million people higher than the initial projection. Most of those people are non-permanent residents, who compete primarily for rental properties.
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Benjamin Tal,
Deputy Chief Economist, CIBC World Markets
NATIONAL OUTLOOK
The government has changed direction in its immigration strategy. They want the share of nonpermanent residents to decrease from 7 per cent to 5 per cent for 2027. This is a reduction of 870,000 people. It is not feasible to deport this many people within this timeframe. Tal (and the Bank of Canada) believes the government will achieve its targets by turning non-permanent residents into permanent residents, while also decreasing immigration levels.
Tal stated the condo market is slowing. Low-rise development is also slower than normal but in a healthy position. However, the high-rise part of the market is in a recession. The condo market is frozen. Pre-construction condos in the GTA are down signifcantly. While new condo prices have not declined very much, resale condo prices are in dramatic decline. In fact, 81 per cent of condos with a mortgage are cash fow negative, which is a record high number. This has led to an increase in rental supply, as investors are selling.
“The market will eventually clear, with interest rates going down. Investors will be back,” said Tal. “However, we are not building anything now. Presale activity is dead. Two to three years from now, the demand will be there, but the supply will be zero.”
Tal also spoke about food infation, changing unemployment rates, expectations for future interest rate cuts, the decline in excess savings, GIC balances, the impact of the presidential election on trade, and more. Visit https://attendee. gotowebinar.com/recording/7000311700878155264 to watch a replay of the webinar.
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