Newcomers hold the key to a sustained recovery in Canadian real estate

Low interest rates, more affordable property prices and the purchasing power of immigrants are combining to boost the real estate market in Canada. The role of immigrants will play a key part in making sure the fledgling recovery in the property market is sustained, it is claimed. Recent official figures point to increased sales activity and rising prices.

While some economists don’t think the current boom will last others believe that it is newcomers that will help the recovery along. They point to information from Statistics Canada data and Census information by Canada Mortgage and Housing Corp that show that the degree of homeownership attained by immigrants just six months after landing in Canada is impressive.

An update report this week from CMHC shows that in the first four years after arriving in Canada, about 68% of survey respondents were in the labour market and that there was a marked increase in the purchasing power of newcomers over their first four years in Canada.

The ratio of survey respondents owning homes went from less than one in five after about six months to more than half by the end of four years and this boost came during a time of escalating prices during the property boom.

Newcomers usually rent and then eventually buy as their financial circumstances improve and they settle into their new life. Now they are making that move more quickly.

Adrienne Warren, senior economist with Scotiabank said that as recent immigrants make the transition from renter to property owner they will increasingly drive real estate demand. ‘Between 2001 and 2006, the homeownership rate grew for all immigrant groups, regardless of how long they had resided in Canada. The biggest increase was among those living in Canada for less than 10 years,’ she explained.

The impact is particularly noticeable in the number of condominiums being sold as immigrants are less likely to buy houses and also condos are more affordable. ‘The younger average age of immigrants relative to the general population and their much higher likelihood of living in major urban centres also favours condominium living,’ added Warren.

Condominiums accounted for more than a quarter of the increase in the number of Canadian homeowners between 2001 and 2006. CMHC said that most immigrants who entered the country classified as ‘skilled workers’ started out as tenants but their propensity to purchase a home was the highest of any group and they have a lower rate of homeownership loss.

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