After reaching the historic 40 million mark this year, Canada’s population is expected to continue surging as the government aims to bring in over 465,000 new immigrants each year. By 2025, the goal is to welcome more than 500,000 newcomers to Canada, according to Immigration, Refugees and Citizenship Canada. Population growth helps to stimulate the economy by filling labour shortages, but a side effect of this growth is that home prices will likely be driven up higher.
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Historically, as the population has increased so have home prices, though not always at the same rate. In order to find out how the rate of population growth affects home prices, Zoocasa analyzed population records and national home prices for the past 18 years using Statistics Canada census data, Statistics Canada population estimates, and the Canadian Real Estate Association benchmark prices.
National Home Price Growth Outpaced Population Growth Almost Every Year
Home prices are influenced by a number of factors, including availability, interest rates, economic cycles, and government policies, and so are not limited to fluctuations in the population. However, it is true that the more people who live in Canada, the more homes are needed, which will exacerbate the already limited supply of homes. In that sense, the population does have an impact on the national average price because demand will increasingly continue to outweigh supply.
In 14 out of the past 18 years, national home price growth exceeded population growth by more than double or triple in most years. Population growth has been steady, hovering just above 1% for most years, while national home price growth has been much more volatile.
Most notably, 2022 was a record-breaking year not only for the housing market but for immigration as well. The government welcomed the largest number of immigrants in a single year, according to Immigration, Refugees and Citizenship Canada, and at the same time, the national average home price soared to a monthly high of $804,900 – a 31% increase from 2021.
2023 didn’t follow this pattern, though that could be because of interest rate hikes, and the national home price dropped by 5.5% from the previous year despite immigration reaching a new record of 3.9% year-over-year growth.
What This Means for Homebuyers
On a grand scale, home price growth and population growth have simultaneously trended upwards and this is likely to continue at an even faster rate in the future. Based on the previous five years, home prices have grown unprecedentedly quickly, and though prices have levelled off from 2022, a significant downward trend is unlikely. Especially for large metropolitan areas that attract the majority of newcomers, such as Toronto, Vancouver, and Calgary, home prices will be pushed upward as demand escalates.
Based on the data analyzed, the largest drop in the national average home price in the past 18 years was in 2009, when the price went from $320,500 in January 2008 to $296,300 in January 2009 – a 7.6% decline due to the Great Recession which began in Canada in 2008. It only took a year for prices to recover and from 2010 until 2018 prices continuously climbed. This indicates that though prices may drop temporarily, in the long-term housing affordability will worsen as the population climbs.
As many housing markets have started stabilizing from last year’s price highs, now is a good time for prospective buyers to enter the market, especially as more rate hikes could be coming later this year.
If you’d like to learn more about rising interest rates, housing affordability and recent market activity, our real estate agents are here to help. Give us a call today and our agents can help you navigate the unpredictable housing market.
