On Monday, Canada reopened its air, land, and sea borders to all fully vaccinated Americans -- not just those with an essential reason to travel -- while also allowing them to skip the mandatory 14-day quarantine (all while cases are rapidly rising thanks to the COVID-19 Delta variant).
The reopening comes after Canada kept its doors closed to most non-essential foreign travellers for over a year and a half, halting both immigration and tourism in the process.
First and foremost, reopening the borders will undoubtedly help boost tourism -- an industry that has been one of the hardest hit throughout the pandemic -- and bring visitors back to cities that heavily depend on tourism.
The reopening will also help improve the flow of immigration, which declined significantly throughout the pandemic. In 2020, immigration levels plummeted, down 46% from 2019. As of January 1, 2021, Canada experienced the lowest annual immigration growth since 1916, impacting all provinces. And while there was a rebound in the first quarter of this year, immigration levels are still below their 2019 peak.
The federal government has been increasing immigration targets to offset the ageing population and to boost the Canadian economy. Canada is now targeting 401,000 new permanent residents in 2021, 411,000 in 2022, and 421,000 in 2023 -- equal to roughly 1% of the population for each of those years. This increase will undoubtedly fuel housing market demand -- which is already high due to a lack of inventory and rock-bottom interest rates.
When mortgage rates plummeted amid the pandemic, housing became relatively more affordable -- and we do mean relatively -- allowing more people to enter the housing market. Simultaneously, government-enforced lockdowns and lengthy stay-at-home orders had residents looking for larger homes with more green space, pushing homebuyers further away from city centres and into suburban areas in the process.
The low borrowing costs and the need for more space ignited demand, with many Canadians finally able to enter the housing market due to conditions created by the pandemic.
This comes as Canada continues to face a severe housing shortage -- with available listings already at a 14-year low even before the pandemic -- which is contributing to increasing housing prices across the country. According to CREA, the national average home price is expected to increase by 19.3% to just over $677,775 in 2021 — up from its previous outlook for an increase of 17% over last year.
Toronto realtor and chartered accountant Scott Ingram believes that with the borders and travel opening up, there's the chance of sellers and agents itching to get away, which could lead to freehold home listings remaining low for a bit longer.
Ingram explains that freehold listings in the 416-area have been below the 10-year average all year, but in July, that gap widened to 34% lower than usual.
"I suspect the back half of the year will quiet down as the front half was so busy (as was the back half of 2020), so there may have been some pull-forward of demand. TRREB has kind of indicated they believe in that too. When they released June results, they upped their forecast of GTA sales for the year," said Ingram.
Ingram is referring to when the Toronto Regional Real Estate Board revised its 2021 sales forecast earlier this summer, increasing its initial prediction of 105,000 transactions to 115,000. If achieved, this would set a record as the biggest year in market history.
"The record for sales volume in a year is 113k in 2016, so they're calling for a record year. However, the June 2021 YTD number (70.1K) was about 10K ahead of the 2016 pace. So the fact they're only expecting it to wind up 2k ahead shows they're predicting it to slow down. Or maybe they're sandbagging it," added Ingram.
Though, between the new immigrants and international students expected to move here and the Canadians who are already relocating in search of affordability, urban centres will likely see their populations grow, bringing even more pressure to local housing markets.
"We're seeing properties receive 10-15 offers after one day on the market. A large part of this is due to borders beginning to reopen, workplace strategies changing, and people knowing they'll be returning to downtown and back to school in September," said Jaffer.
"New immigrant students and everyday people returning to work are driving the rental market at the moment, and I think it's only going to get stronger when immigration is back in full swing."
Beyond the rental market, Jaffer says he thinks Toronto's housing market will also see strong demand on the purchase and sale side.
"While the housing market has slowed down and cooled off a little bit over the summer, there is some inventory, but buyers, in large part, are not really paying attention. We're turning to a typical August pre-COVID. Everyone's been locked up, and they're thinking, let's have some fun and not worry so much about real estate. But, come the fall, things could go a little crazy again."
Jaffer added that he thinks both buyers and sellers will benefit in the fall market. "Sellers will see more competition for their homes and likely achieve more than they expected, while buyers should see more options come to market. New immigrants are walking into strong purchase and leasing markets, hopefully, with lots of new inventory in the fall, while homeowners will likely see further appreciation for their assets and the government will make more money through increased land transfer and property taxes."
What does remain certain is that an open border means more new people coming into Canada than a closed border. And, after a year of unprecedented housing market demand across the country, Fall 2021 and beyond might just be ready to say 'hold my beer.'