Multifamily rents across the country rose last year, but rate increases are slowing as Statistics Canada warned planned immigration reductions could affect population growth and apartment demand.
One of Canada's leading banks added fuel to the debate on immigration by suggesting that while a boost in non-permanent residents was creating some short-term pain, the rising population ultimately would create a long-term gain for the country.
CIBC's deputy chief economist, Benjamin Tal, said Canada's population has grown by 3.2 million, or 8.4%, since mid-2021. In January 2024, the 3.2% annualized growth rate was the highest seen since 1957.
"However, unlike the baby boom period, over 95% of recent growth is from arrivals from abroad that require services and housing immediately upon arrival," Tal wrote in a report.
The economist argued that from a longer-term perspective, retaining and integrating current immigrants would result in stronger potential growth and improved productivity as more new arrivals find employment closer to their skill level or add to their skill set.
Tal has said the country and real estate industry was unprepared for the influx of immigrants because estimates for population growth from Statistics Canada have been wrong.
"Unplanned population growth places enormous pressure on governments struggling to provide public services for their existing population. With the sheer scale of the population/capital mismatch in Canada, the public backlash was both predictable and inevitable," Tal wrote.
The federal government has since reversed course on immigration policy with plans to reduce the number of immigrants granted permanent resident status by more than 20% from 500,000 annually to 395,000 in 2025.
Landlords have already expressed concerns about what a drop in immigration might mean for rental levels, and the subject is a key issue among executives at real estate investment trusts.
The issue comes with a federal election on the horizon after Prime Minister Justin Trudeau said he would step down. The governing Liberal Party is in a leadership race to replace him in time for what is expected to be a spring election call.
Rent growth slows
A report from real estate software company Yardi said apartment rent growth is decelerating, with the average national in-place monthly rent up $18 quarter over quarter from the third to the fourth, and $85 as an annual gain.
Yardi said it used data from more than 492,000 units across 5,500 properties and found rising vacancy rates. But even with slowing rent growth, the company said renters face persistent affordability pressures.
"The increase in vacancy rates and moderation of rent growth signal a significant shift in Canada's rental market dynamics," Peter Altobelli, vice president and general manager of Yardi Canada, said in a commentary. "These trends suggest some easing of the intense competition we've seen in recent years, but affordability challenges remain at the forefront."
The national vacancy rate hit 3.6% in the last quarter, the highest since 2020, with bachelor units seeing the largest increases, according to Yardi. But even with that increase, the annual turnover of 23.1% is historically low, reflecting rental demand and the decision by some to stay in their apartments to avoid being subjected to higher market rents.
"Collaborative efforts between developers and policymakers will be critical in addressing the evolving needs of renters across the country," Altobelli said.
Canada has a population of about 41.5 million. According to the government's medium-growth scenario, that figure will likely rise to 59.3 million in 2074.
For its part, Statistics Canada warned that under a low-growth scenario, the population could be as low as 45.2 million by 2074. The agency's high-growth scenario put the number at 80.8 million. Multifamily developers typically like to build in areas with fast-growing populations.
"In the short term, a substantial reduction in the number of permanent residents admitted to the country, as well as a decrease in the number of non-permanent residents, would result in much lower population growth than that observed recently in 2022 and 2023," Statistics Canada said in its report. "The population would even decrease slightly from 2025 to 2026, according to the low- and medium-growth scenarios."