Condo asking rents have also fallen fastest in markets most exposed to immigration changes
Canada’s recent move to dial back immigration has started to reshape the housing market, with the most immediate effects showing up in the country’s rental sector.
According to Statistics Canada, the number of non-permanent residents dropped for the third time in a row, reaching 7.3% of the total population in the quarter, versus 7.6% at its peak. Most of the decline came from foreign students and temporary workers leaving the country.
“Reduced immigration has moderated demand for purpose-built rentals and, consequently, rent growth,” TD economists Beata Caranci and Marc Ercolao said in a recent analysis.
“We estimate rent growth will likely average 2 percentage points lower than the counterfactual scenario of maintaining higher population growth.”
Condo asking rents have also fallen fastest in markets most exposed to immigration changes, particularly in British Columbia and Ontario. These provinces, which have historically attracted a high share of temporary foreign workers and international students, are now seeing the sharpest declines in rental demand.
“The largest shifts are in B.C. and Ontario due to having a higher proportion of temporary foreign workers and students,” Caranci and Ercolao said.
Rental growth slows, but affordability challenges persist
The federal government’s recalibration of immigration targets followed concerns that the country’s infrastructure and housing supply were struggling to keep pace with record population growth.
Canada’s population growth rate plummeted from a multi-decade high of 3.2% in Q2 2024 to just 0.9%, according to the analysis. This shift has helped moderate rental price increases.
“A particularly significant impact has occurred in the purpose-built rental market, where drastically slower immigration inflows underpin our softer rent growth forecast of 3-3.5% in 2026—roughly half of 2024’s growth rate,” Caranci and Ercolao said.
Yet, affordability remains a challenge. Even with slower rent growth, the average Canadian renter is still facing historically high costs. The analysis estimated that, without the immigration slowdown, Canadians could have paid an additional $1,100 per year for a one-bedroom apartment by 2027.
Labour market and spending trends defy expectations
While the housing market has responded as intended, the broader economic impact has been less predictable. The unemployment rate, which had risen over a full percentage point between 2022 and 2024, would likely have been at least 1 percentage point higher if immigration growth had continued unabated, according to the same analysis.
However, household spending has proven surprisingly resilient. “Despite the collapse in population growth, there has not been a parallel downshift in consumer demand for goods and services,” Caranci and Ercolao said.
Looking ahead, experts stress that immigration policy should remain flexible to respond to changing market conditions. “Immigration policy shouldn’t be static. Adjustments should reflect changing market conditions and skills demands,” Caranci and Ercolao said.
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