Canada’s real estate market has been experiencing unprecedented changes in recent years, partly driven by the surging population. The country is now home to 40 million people, after hitting the milestone this year, and the federal government’s plan to welcome an additional 1.5 million immigrants by 2025 has set the stage for a significant demographic shift.
Historically, population growth has played a role in home prices, as more people require housing. Zoocasa looked closer at the relationship between population growth and home prices and analyzed data from Statistics Canada census records, population estimates, and CREA’s benchmark prices spanning the past 18 years.
The findings reveal a clear correlation between population growth and home prices, though the impact is not always immediate or proportional. As Zoocasa notes, home prices are influenced by a myriad of factors, including economic cycles, government policies, and interest rates, in addition to fluctuations in population. However, the rising demand for homes resulting from population growth contributes to an already limited supply, putting upward pressure on prices.
National home price growth outpacing population
In 14 out of the past 18 years, national home price growth has outpaced population growth by a significant margin, often doubling or even tripling the population growth rate. While population growth has been relatively steady, hovering just above one per cent most years, “national home price growth has been much more volatile.”
One standout year was 2022, during which Canada witnessed a record-breaking influx of immigrants and experienced a staggering 31 per cent increase in the national average home price compared to 2021. However, 2023 took a different turn, with a 5.5 per cent drop in the national home price, despite immigration reaching a new record of 3.9 per cent year-over-year growth, though rising interest rates likely played a significant role in the price decline.
Long-term outlook: home prices and population growth on the rise
Despite occasional price drops, the long-term trend suggests that home prices and population growth are likely to continue their upward trajectory, particularly in major metropolitan areas like Toronto, Vancouver and Calgary, which attract the majority of newcomers. This is a vital consideration for potential homebuyers, as waiting for a significant downward trend in prices might not be realistic.
Zoocasa’s analysis also highlights that the largest drop in the national average home price in the past 18 years occurred in 2009, during the Financial Crisis, when prices fell by 7.6 per cent. However, prices quickly rebounded, and over the subsequent years, housing affordability worsened due to population growth.