This October, there were two notable developments for Canada’s real estate market: the Bank of Canada’s fourth consecutive rate cut and the Federal Government’s decision to reduce its immigration targets through 2027. Both moves promise to shape our market in substantial ways, although their impacts will likely differ in scope and immediacy.
Starting with the latest in a string of rate cuts, on October 23rd, the Bank of Canada lowered its key lending rate by 50 basis points, to 3.75%. This follows September’s inflation report, which indicated that inflation in Canada fell to 1.6%, down from 2% in August. The data aligns with the Bank’s overarching goal of keeping inflation at or below 2%, inclusive of shelter costs.
Given these figures, it’s anticipated that more rate cuts are on the horizon, which will improve affordability and likely spur demand for home ownership. To date, lower interest rates haven’t dramatically influenced buyer behavior, with many remaining on the sidelines in anticipation of greater affordability. However, this latest announcement could be a turning point.
Though rates garner the bulk of the market’s attention, let’s turn to the other significant announcement: the Federal Government’s new immigration policy. On October 24th, the Minister of Immigration, Refugees, and Citizenship announced the 2025–2027 Immigration Levels Plan. This plan represents a substantial shift in Canada’s approach to population growth. Specifically, it reduces the target from 500,000 new permanent residents per year to 395,000 in 2025, 380,000 in 2026, and 365,000 in 2027. Further, Canada’s temporary population is expected to decline by approximately 450,000 in both 2025 and 2026.
This policy will likely influence various aspects of the real estate market, particularly the rental sector, which should feel its effects immediately. In cities like Toronto, with high concentrations of international students, this will ease pressure on vacancy rates. In turn, this policy should influence investor behaviour, which bases purchasing decisions on stable demand and rising rents. As a result, expect to see tempered demand for pre-construction condo and purpose-built apartments, further challenging a new condo industry which was down 85% below its 10-year average in September.
While immigration rates will undeniably shape Canadian households and market demand over the long term, the more immediate factor affecting buyer behavior is still likely to be interest rates. Immigrants, in their initial years in Canada, typically rent before moving up the property ladder. Therefore, the short-term affordability that lower interest rates bring should have the stronger effect on demand than will a reduction to population.
As we look ahead, we see two forces at work: monetary policy and immigration policy. The interplay of these factors will shape the Greater Toronto Area’s housing market in ways that are both complex and significant. Homebuyers, sellers, and investors alike will need to stay tuned into these changes to understand how shifting conditions will affect their opportunities.
As always, the Harvey Kalles Real Estate sales team is here to guide you, providing insights and strategies to help you navigate this evolving landscape. We have been in business since 1957, and can expertly guide you through any real estate market environment.
