Canada’s immigration overhaul to cool housing demand: RBC

Canada’s new immigration rules will slow population growth and reshape the housing and mortgage markets. The government is cutting temporary resident numbers but making it easier for some to become permanent residents—a shift expected to impact lenders, brokers, and property investors.

Officials extended their timeline for shrinking the temporary resident share to “less than 5%” of the population, pushing the target date to the end of 2027.

“The net effect of these changes shouldn’t impact our population growth projections for 2025, tracking just under 1%,” said RBC economist Rachel Battaglia.

“Beyond this year, our forecasts already assumed milder outflows would bring temporary residents toward 5% of the population by the end of 2027—aligning with the government’s revised timeline.”

Yet, uncertainty lingered. “The timing of current temporary resident departures and various exemptions continue to add uncertainty to near-term population growth rates,” Battaglia said.

Both permanent and temporary resident arrival targets will continue to be refreshed annually, adding to the unpredictability facing housing and mortgage professionals.

Rental market faces pressure as demand cools

With fewer temporary residents and international students entering the country, demand for rental units and entry-level homes is likely to soften, especially in cities that rely heavily on newcomers to drive growth.

“Reduced inflows have significant effects on Canada’s rental markets—particularly in areas with a high concentration of students,” Battaglia said.

“Further target reductions could make rental market cooling more pronounced.”

Permanent resident fast-tracking may shift demand

Permanent resident admissions are set to rise over the next two years. While the official target is frozen at 380,000 annually from 2026 to 2028, one-time exemptions will boost actual admissions to 437,500 in 2026—an 11% increase from 2025. “Processing more permanent residents opens up capacity for new arrivals,” Battaglia said.

The government will also 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. However, this may not fully offset the drop in new arrivals.

Mortgage origination volumes could decline

If overall population growth slows, fewer people will be entering the market for new homes, leading to reduced mortgage applications and origination volumes for lenders and brokers.

The government’s annual refresh of immigration targets and the unpredictable timing of departures and arrivals make it harder for industry professionals to forecast demand and plan for the future.

Cities and provinces that have depended most on temporary residents and international students may see the biggest changes in housing demand, while areas with more permanent immigration may be less affected.

While fast-tracking permanent residents may cushion some of the impact, the overall effect is likely to be a cooling of both the housing and mortgage markets, especially in the short term.

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