[Vancouver Sun – August 27, 2020]

House prices are more or less flat in Vancouver and Toronto, which are considered gateway cities for global migrants.

Rental prices are softening in Vancouver and Toronto and housing prices are soon to follow as the number of new immigrants and foreign students falls sharply because of border restrictions aimed at combatting the spread of COVID-19.

Average rents have dropped by eight per cent in Vancouver and Toronto in recent months. Hundreds of thousands of dwellings filled by last year’s cohort of 642,000 international students are empty. And a record number of investor-owned condo units, formerly rented, have been listed for sale.

Despite a summer uptake of pent-up buying, house prices are more or less flat in both metropolises, which are considered gateway cities for global migrants. Along with some major banks, the Canada Mortgage and Housing Corp. is among those warning that property values should significantly depreciate in the next 12 months.

“Amid ongoing border restrictions, travel-related health fears and the global economic downturn, we expect immigrant levels to be down sharply in 2020” from the record of 370,000 in 2019, says RBC senior economist Andrew Agopsowicz.

“A slowdown in immigrant-related demand for homes could squeeze the rental and housing markets.”

“Urban rental and housing markets and university budgets” will be among the casualties as foreign student numbers drop almost in half and as immigration intake is slashed to roughly 240,000 this year, says RBC. The country took in 271,000 immigrants in 2015.

RBC economists cautioned this month that, unlike in previous years, most of the people who became permanent residents in Canada in the spring were already in the country, which means they are not necessarily creating new demand for housing.

The populations of Vancouver, Toronto and Montreal, noted Agopsowicz, would be declining if it weren’t for foreign-born migrants. That is because people have not been moving to those cities from other parts of the country, and “Canadian-born millennials fled for more affordable outlying areas.”

The rental market in major Canadian cities has been especially hit by stalled migration rates.

Zoocasa, a real-estate brokerage, reports the number of condo apartments offered for rent across Metro Toronto has risen by 45 per cent compared to last year. In the core of the city, which has many colleges and universities, condo rental listings have skyrocketed 80 per cent.

Even though similar data is not available for Metro Vancouver, Rental.ca reports an eight-per-cent decline in rental costs in the city. And there has been a 35-per-cent spike in condo apartments, many of which had been rented, being off-loaded for sale. Almost 3,000 are up for grabs, the most in five years.

The average price of a rental in both Metro Vancouver and Greater Toronto is now the same, $2,239 per month, while it is $1,709 in Montreal.

With Ottawa telling many foreign students to delay plans to attend classes, real estate analyst Stephen Punwasi, of Better Dwelling, says “students that have been paying rent and living overseas (away from their homelands) are unlikely to renew their digs in Canada into the school year. … With their extended absence, hundreds of thousands of homes will be sitting empty.”

The number of people who obtained a study permit to come to Canada was down 40 per cent in the second quarter of this year, after COVID-19 hit, compared to the same quarter last year. In B.C., foreign students have dipped by 38 per cent.

International students are typically renters, Punwasi said, but it is becoming more common for many of them to buy homes.

The housing market in Vancouver and Toronto is more complicated than the rental scene, where the decline of foreign students is contributing to tenants having more choice after years of almost zero-vacancy rates.

In light of restrictions to combat the coronavirus, the number of new permanent residents moving to Toronto has dropped by 41 per cent, and to Montreal by a whopping 63 per cent. (The latter is partly due to Premier Francois Legault’s commitment to reducing immigration levels.)

For some reason, the immigration plunge has been milder for Metro Vancouver, where the dip has been just 19 per cent, according to Better Dwelling. This may partly explain why prices have so far been more or less holding compared to 2019, a relatively down year.

“Canada’s largest real-estate markets partially attribute their fast-climbing prices to immigration. However, with a significant decline in permanent residents, prices have yet to slow down,” Punwasi observes.

The cost of an average home this spring was $1.038 million in Metro Vancouver, $870,000 in Greater Toronto, and $435,000 in Montreal.

The B.C. Real Estate Association confidently claimed on Tuesday that average home prices will rise 7.7 per cent in this province by the end of 2020 and 2.2 per cent in 2021, maintaining people in higher-earning jobs have not been hit hard by the pandemic.

But other analysts, without vested interests, have several explanations why there has been a delay in the way COVID-19 rules and slumping in-migration are expected to lower values.

Those analysts are aware of Statistics Canada studies showing immigrants have uncommonly strong desires to invest in housing — and that the average price of a Metro Vancouver home bought by a new immigrant was on average $824,000 or higher than one purchased by a person born in Canada.

The CHMC’s Evan Siddal has cautioned that Canadian prices will decline by nine to 19 per cent in 2021 after the payment crunch hits this fall and winter for 740,000 Canadian homeowners who have been on COVID-19 mortgage holidays. Other analysts predict in the next year far fewer COVID-battered people will feel it prudent to take advantage of Ottawa’s record cheap mortgages.

Combining such factors with how sinking numbers of foreign students and immigrants are expected to impact the real estate markets in Vancouver and Toronto, which have been growing faster through immigration than any other North American cities,  the safest prognosis for the medium term is weaker prices.