BCREA economists expect increased immigration to put significant upward pressure on B.C.’s already strained housing market

B.C.’s housing market is set to experience significant changes over the next few years, driven by two federal government policies, according to the British Columbia Real Estate Association (BCREA). 

The latest market intelligence report from the provincial association explores how Canada’s foreign homebuyer ban and the record-high immigration targets that aim to bring in nearly 1.5 million new permanent residents will shape housing demand in B.C. over the next three years.

The government introduced the foreign homebuyer ban, restricting the purchase of residential property by non-Canadians for two years, to improve affordability for Canadians looking to buy a home. 

However, BCREA reports that existing programs, such as B.C.’s foreign buyer tax, indicate that a small number of transactions involve purely foreign buyers (in the territory of 1.0 per cent, BCREA says), suggesting that the ban may not achieve its objective of lowering home prices.

In contrast, the increase in immigration will put additional pressure on the already strained housing market, leading to increased competition for available housing and upward pressure on prices. 

Housing demand impact

The demand impact of the increase in immigration is estimated to be approximately five times as large as the foreign buyer ban, and BCREA economists expect it to place significant upward pressure on home prices.

Moreover, the new permanent residents the government aims to welcome into the country by 2025 will be exempt from the ban since the ban does not apply to permanent residents. Therefore, BCREA says the ban is unlikely to significantly impact demand generated by increased immigration targets.

To address the deterioration in affordability, BCREA is forecasting new home completions would need to increase substantially above their historical average level and sustain this record-high pace of construction for an extended period. 

BCREA suggests that to offset the increase in immigration, new home construction in B.C. needs to ramp up by 25 per cent over the model baseline for the next five years to a record level of about 43,000 completions per year.

“Instead of policies designed to limit demand through taxation or prohibition, governments should pursue an abundance agenda for housing.”

BCREA notes the vital role immigration plays in the economy, “The challenge lies in creating policies and programs that support and welcome immigrants while addressing the consequent pressures on an already stressed housing market.”

The report adds, “Instead of policies designed to limit demand through taxation or prohibition, governments should pursue an abundance agenda for housing….Without such an agenda, it will only be a matter of time before the market is again facing accelerated price growth and deteriorating affordability as demand soars and supply struggles to keep pace.”

Find BCREA’s detailed market intelligence report here, including the association’s model analysis. 

REM Editorial Team