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Investing.com -- Canada’s slowing immigration growth could ease pressure on the country’s strained housing market and contribute to a return of affordability over the coming decade, according to a new analysis from the Parliamentary Budget Officer. The watchdog forecasts that, with fewer newcomers arriving, the number of new households formed annually will drop well below recent highs, allowing housing supply to gradually catch up.
The government’s efforts to reduce the share of temporary residents, through visa restrictions for international students and foreign workers, are already reshaping housing dynamics. Household formation is expected to fall sharply from 482,000 in 2024 to a level below its historical average of 176,000 by 2025, and remain subdued until at least 2030.
This demographic shift could allow housing construction to outpace demand. The PBO projects an average of 227,000 net new units will be completed each year between 2025 and 2035, compared with just 159,000 net new households added annually over that period.
That gap of 68,000 units per year could help ease rental and home price pressures that have intensified over the last decade, particularly in urban centers. Canada’s total housing stock expanded by a record 276,000 units in 2024, but still fell short of matching the exceptional jump in household formation driven by elevated immigration levels.
The PBO estimates an additional 690,000 housing units will still be needed by 2035 to restore long-term supply-demand balance and account for suppressed household formation, households that would be formed if affordable options existed. Meeting that target, combined with baseline projections, would require completing 3.2 million units by 2035, or 290,000 per year.
Reaching that level would mean maintaining annual completions above 2024’s record for over a decade, a challenge even with declining demand growth. However, if immigration remains contained, the current pace of building may suffice to improve housing affordability without requiring unprecedented construction levels.
The PBO emphasizes that its forecast does not incorporate recent government promises to double homebuilding rates. Rather, it is based on long-term economic trends and demographic projections that suggest easing population pressures could rebalance housing markets without triggering an oversupply.