Canadian real estate prices are climbing on the country’s booming population. More demand means higher home prices, right? Not so fast, it may not be as straightforward as the narrative. Statistics Canada (Stat Can) data released today shows immigrant income levels from a survey conducted in 2021. Recent immigrants to Canada earn significantly less than their peers, and would struggle to pay for basic shelter at today’s prices—nevermind drive prices higher.
Canada’s Recent Immigrants Earn Much Less Than Non-Immigrants
Immigrants that arrived in Canada from 2016 to 2019 earn significantly less than non-immigrants. Those immigrants had a median income of $35.6k/year, about 20% (-$7.2k) less than their non-immigrant peers. If you assume a dual median income household, finding shelter within their budget isn’t an easy task.
Canada’s Recent Immigrants Can’t Afford To Rent In Most Cities
Rental housing within their budget isn’t an easy task at those income levels. Maxing out their budget to the shelter poverty limit of 30%, they can afford a maximum of $1,780/month. That’s about 17% lower than the $2,140/month a dual income, non-immigrant household could spend before hitting the shelter poverty definition.
The average listing for a one bedroom apartment across Canada was just a hair over $2,000/month in April. Keep in mind that’s across the country, not in more expensive cities like Toronto (avg. $2,370/month) or Vancouver ($2,600/month).
Canadians Could Afford To Buy A Home In Just A Handful of Cities
Buying a home is also going to be a challenge at this income level. If we assume they max out their leverage and use a high ratio mortgage, the max purchase price is around $300k. It’s about 18% (-$65k) lower than a non-immigrant household could afford.
A budget of that size won’t go far across Canada. According to CREA, a typical home across Canada was $709,000 in March. Only a handful of cities are even close to the budget—Winnipeg ($331k), Moncton ($309), Quebec City ($323k), St John’s ($313k) Regina ($309k), Mauricie QC ($231k), Fredericton ($273k), or Saint John ($270k).
A narrative can carry a trend for a short period, but it becomes more difficult to hold. Rapid population growth and immigration can certainly drive demand, but incomes don’t quite support that long term. The only way to persistently drive rents without a rapid, inflationary growth of income, is by taking larger shares of incomes from households. However, a widespread adoption of shelter poverty isn’t exactly a strong selling point for future immigration.
