In a bold policy shift, the Canadian government has significantly revised its immigration targets, aiming to ease pressure on housing, infrastructure, and public services. This immigration reset is already having measurable effects on the national real estate market, with early data suggesting a cooling in population growth—and with it, a moderation in housing demand.
While this strategy may offer temporary relief for strained rental markets and overburdened homebuyers, it introduces new risks and regional imbalances that industry stakeholders must now navigate.
Immigration and Housing: An Interdependent Relationship
Over the past decade, immigration has been a cornerstone of Canada’s demographic and economic growth strategy. It has driven demand for housing across both ownership and rental markets, especially in major metropolitan areas like Toronto, Vancouver, and Montreal.
As newcomers arrived in record numbers—over a million in 2023 alone—the gap between supply and demand widened sharply. Housing completions failed to keep pace, vacancy rates plummeted, and affordability eroded. The federal government’s revised approach is an acknowledgment that unbounded growth without adequate planning is unsustainable.
Understanding the New Immigration Framework
Canada’s 2025–2027 Immigration Levels Plan significantly lowers targets for both permanent and temporary residents. It also introduces—for the first time—caps on international student permits and work-related temporary visas.
- Permanent Residents: Reduced from 485,000 in 2024 to 395,000 in 2025, with a strategic focus on transitioning existing temporary residents to permanent status.
- Temporary Residents: Capped at approximately 674,000 new arrivals in 2025, down from nearly 960,000 in 2024.
- International Students: Targeted reduction to 305,000 new student permits in 2025, with provincial quotas introduced in early 2025.
This recalibration is aimed at bringing the proportion of temporary residents down to 5% of the national population by the end of 2026. That’s a significant shift from the 7.3% recorded at the beginning of 2025.
Early Signs of Market Impact
Already, the effects are being felt. Population growth slowed to just 0.2% in Q4 2024—the weakest pace since the pandemic—as net outflows of non-permanent residents increased. For housing markets, this translates to a reduction in short-term rental demand, particularly in urban areas heavily reliant on international students and temporary workers.
In Toronto, for instance, average home prices declined 2.5% year-over-year as of March 2025, while two-bedroom rental asking prices fell by 9% compared to late 2024—evidence that policy changes are influencing behavior across both ends of the housing spectrum.
Market Outlook: Stabilization Over Correction
Nationally, the real estate market appears to be entering a phase of stabilization. The average home price is expected to rise modestly by 2.8% in 2025, after a decline in 2024. Purpose-built rental vacancy rates are forecast to improve slightly—from 2.2% to around 2.6%—offering some relief to tenants after years of pressure.
However, this easing of demand doesn’t automatically resolve the supply side. Housing starts are projected to fall to 225,000 units in 2025, down from 240,000 in 2024—below the levels required to maintain affordability in the long term. Without faster permitting, increased skilled labour, and more aggressive build-out strategies, the country risks facing renewed shortages once population growth resumes.
A Tale of Diverging Regions
Ontario and B.C.: Slower Growth, Rising Inventory
These provinces are expected to see the most direct impact from reduced immigration. Price forecasts have been revised downward, especially in the Greater Toronto and Vancouver areas. Slower inflows are coinciding with new housing completions, shifting the supply-demand balance and giving buyers more leverage.
Alberta and Atlantic Canada: Still Growing
Conversely, markets like Calgary and Halifax are benefiting from strong interprovincial migration. Alberta, in particular, continues to attract residents from pricier provinces due to its relative affordability and job opportunities, especially in energy and tech. Halifax remains resilient as returning Atlantic Canadians help offset declines in international newcomers.
What to Watch in 2025 and Beyond
- Interest Rate Cuts: Most major banks project 50–75 basis points in cuts from the Bank of Canada in 2025. Lower borrowing costs could stimulate demand, especially in more affordable regions.
- Temporary Resident Enforcement: If the government fails to manage departures effectively, the share of temporary residents could remain elevated, complicating its policy goals.
- Construction Pipeline Risk: Developers are pausing projects due to weaker pre-sales and higher financing costs, potentially triggering a supply crunch by 2027.
- Skilled Labour Shortage: With fewer newcomers entering skilled trades, homebuilding timelines may be delayed, undermining gains made from demand-side controls.
Implications for Stakeholders
- Investors and REITs: Secondary markets like Calgary and Halifax are attractive for rental growth, with cap rates expected to remain stable through 2025.
- Developers: Purpose-built rentals are likely to remain a safe bet, supported by policy incentives such as GST rebates and provincial funding programs.
- Governments: Federal and provincial authorities must now focus on accelerating housing delivery—even amid lower population growth—to avoid repeating past affordability crises.
Conclusion: A Breather, Not a Breakthrough
The 2025 immigration reset gives the Canadian housing market a moment to pause and recalibrate. But unless this breathing room is used to address supply constraints, the long-term issues of affordability, accessibility, and housing equity will remain.
The reset highlights the importance of aligning immigration, infrastructure, and housing policy. As Canada prepares for future population growth, building smarter—not just faster—will be key.
Sources
- Immigration, Refugees and Citizenship Canada – 2025–2027 Immigration Levels Plan
- Statistics Canada – Quarterly Demographic Estimates, Q4 2024
- CMHC – Housing Market Outlook, February 2025
- RBC Thought Leadership – Housing and Rental Market Insights
- TD Economics – Regional Housing Forecast, 2025
- Reuters – Canada Housing and Immigration Policy Reports
- Toronto Regional Real Estate Board (TRREB) – Market Watch
- Calgary Real Estate Board (CREB) – 2025 Forecast
- RE/MAX – Canadian Housing Market Outlook 2025
- CBRE – National Apartment Market Report 2025