The latest Canadian Real Estate Association (CREA) report said home sales across the country slowed in January, primarily due to snowstorms and cold winter weather.
In his report, CREA’s senior economist, Shaun Cathcart, said, “the story was probably more about a historic winter storm than a downshift in demand” after activity in central and southwestern Ontario fell sharply along the storm’s path."
However, David-Alexandre Brassard, chief economist at Chartered Professional Accountants of Canada, points to a reduction in immigration as a more likely cause.
Two years ago, in its 2025-2027 Immigration Plan, the federal Liberal government reduced its immigration quotas for permanent residents from 500,000 to 395,000 in 2025 with a further reduction to 380,000 in 2026.
Included was a decrease in temporary residents, from 675,000 in 2025 to 385,000 in 2026 as well as a 60% reduction in new permits for international students.
“We have almost never seen a Canadian housing market that wasn’t supported by strong population growth, so it’s not surprising to see sales and prices soften without that growth,” said Brassard in a note to clients last week.
“We could be tempted to blame rougher conditions on bad weather, as was done with the recent dip in labour market data, but new listings were higher in January than in recent months and matched last year’s levels,” added Brassard. “Weak sales are pushing inventory up to where it was in spring 2025, when tariff uncertainty was at its peak.”
Brassard said mortgage providers have seen a trend developing for a number of months.
“While interest rates have eased slightly, slower population growth is now weighing more heavily on demand,” he said. “Demographics will play a much bigger role in shaping sales and prices going forward, especially with a policy rate expected to remain steady for some time.”
The slowdown has reduced demand for purpose-built rentals, moderating rents, said TD economists Beata Caranci and Marc Ercolao in a recent analysis.
“We estimate rent growth will likely average two percentage points lower than the counterfactual scenario of maintaining higher population growth,” they said in their analysis.
Rents are falling fastest in BC and Ontario, which have historically seen the highest shares of temporary foreign workers and students, wrote Caranci and Ercolao, adding the two provinces are seeing declines in long‑term housing and mortgage demand, resulting in weaker pre‑sale and condo activity.
An RBC Economics report, from economist Rachel Battaglia, noted the government “will fast-track up to 33,000 temporary workers to permanent status, though it remains unclear whether these transitions are additional or within existing quotas.”
“By converting more temporary residents to permanent status, the government may stabilize some housing demand, as permanent residents are more likely to buy homes and seek mortgages,” said Battaglia. “However, this may not fully offset the drop in new arrivals.”
“While the official target is frozen at 380,000 annually, one-time exemptions will boost actual admissions to 437,500 in 2026, an 11% increase from 2025,” she said, adding. “Processing more permanent residents opens up capacity for new arrivals.”
Bank of Montreal senior economist Sal Guatieri said during a conference lower immigration “will be a bit of a dampener on consumer spending and, of course, the housing markets and rental markets for a little while.”
With February soon to be in the rearview mirror, Canadians will march into the traditionally busiest home buying months of the year, providing a much clearer picture of the health of housing markets across the country.
