First recorded population drop forces lenders to rethink demand, risk and regional bets
Canada’s first annual population decline on record has added a new twist to an already complex mortgage and housing cycle, shifting the conversation from how to keep up with demand to how to manage flatter growth and sharper regional divides.
Preliminary estimates from Statistics Canada put the population at 41,472,081 as of January 1, 2026. That's down about 103,500 people, or 0.2%, from three months earlier – and roughly 102,000 over 2025 as a whole.
The agency highlighted a steep drop of more than 171,000 non‑permanent residents in the fourth quarter, alongside a small natural decrease, and cautioned that permit renewals could bring revisions in coming releases.
Robert Kavcic, senior economist and director, Economics at BMO Economics, described the recent data as “the first annual population decline on record going back to WWII."
“We’re now fully in an era of normalization, with population growth of around zero expected through 2027, before settling back to a baseline of just under 1%.”
From historic demand shock to cooling rentals
The reversal arrived just two years after Canada’s population grew by about 3.2% in 2023, one of the fastest rates in the G7, largely on the back of temporary residents – a surge BMO’s Kavcic and colleague Sal Guatieri previously described as “a historic demand shock” for housing.
Canadian Mortgage and Housing Corporation has warned that, even with slower growth, the country still faced a multi‑million‑unit housing supply gap by 2030, driven in part by earlier immigration‑fuelled gains and years of underbuilding.
Non‑permanent resident outflows have now started to ease pressure, especially in major rental markets.
“Nonpermanent resident (NPR) net flow remained negative following caps on international students and temporary foreign workers, with a net outflow of 171,000 in the quarter,” Kavcic said, noting that the impact has been “cutting deeply in B.C. and Ontario, where the population has declined 0.7% in the past year.”
TD Economics previously highlighted how an immigration slowdown “cools Canada’s rental market” even as affordability remained strained. An RBC analysis, meanwhile, said new immigration rules were likely “to cool housing demand,” with fewer temporary residents expected to soften demand for rentals and entry-level homes, even as some were fast-tracked to permanent status.
Bank of Montreal (BMO) senior economist Sal Guatieri said during a conference this year that lower immigration “will be a bit of a dampener on consumer spending and, of course, the housing markets and rental markets for a little while.”
Mortgage demand to shift, not vanish
For lenders and brokers, the question is no longer whether population growth alone could carry origination volumes, but where future borrowers would come from and how sticky demand would prove in key regions.
Alberta still posted modest growth and continued to lead interprovincial inflows, even as Ontario, Quebec and British Columbia recorded net declines.
Kavcic stressed that the demographic reset remains broad‑based. “The major population adjustment is well underway, and it is having impacts across various aspects of the economy including housing, consumer spending, the job market, inflation, productivity and per-capita GDP. It’s touching pretty much everywhere,” he said.
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