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Strong population growth in Canada’s major urban centres has long been cited as a key economic fundamental supporting the country’s booming housing market.

Now with borders closed and the immigration landscape changed due to the COVID-19 pandemic, housing demand from this group will inevitably be impacted.

In a Canadian housing forecast update published earlier today by TD Economics, economist Rishi Sondhi wrote that population growth is one of four factors that have negatively impacted demand for housing, not just from recent immigrants but from real estate investors as well.

“Stalled population growth will test the resilience of investors whose units will be completed soon, as the pool of potential renters will shrink in the near-term. This could force some selling pressure,” wrote Sondhi.

Real estate investors, especially those in large immigration hubs like Toronto and Vancouver, depend on rental demand to keep their properties occupied. Both cities have also had rental supply shortages and extremely low vacancy rates for years, leading to significant increases in rent prices over the last decade.

Immigrants arriving in Canada’s hub cities often enter the rental market, so with this source of demand declining, investors may be forced to sell their properties rather than face slashing rent prices or risk having units sit empty.

In the second half of March, real estate consultancy Urbanation found that lease volumes in Toronto had already declined 39 percent when compared to the first half of the month.

“The decline in rental transactions can clearly be related to the impact of the protective measures and economic uncertainty stemming from the onset of COVID-19 pandemic, with renters less willing or able to take on a new lease at current rents, as well as the closing of Canadian borders and the logistical challenges with showing units and planning for a move in the current environment,” wrote Urbanation President Shaun Hildebrand.

Hildebrand said that the slowdown observed in March will likely continue for at least the next few quarters.

“The impact on rents will be something to watch, which will also be influenced by the timing of the record number of units that were expected to complete this year,” he added.

Beyond the impact of immigration on housing demand, TD’s Sondhi also identified social distancing, historic job losses and volatile equity markets as the major culprits taking a large bite out of demand through the pandemic.

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