Metro Vancouver’s young adults are increasingly competing with international students, foreign workers and financially supportive offshore parents to buy a home or find a place to rent.
A Canada Mortgage and Housing Corporation report released this week shows international students and temporary workers under the age of 25 are responsible for 10 per cent of the mortgages issued by the country’s five largest banks to that age group in Toronto and Vancouver.
Andrew Scott, a senior market analyst for CMHC, said in his report that foreign students and offshore workers in Canada “account for more than their share in urban housing markets.” Many young arrivals are buying high-priced condominiums and houses, Scott noted, signifying many “may be receiving parental support to purchase homes.”
Perhaps more importantly, since the number of non-permanent residents has more than doubled in a decade to 140,000 in Metro Vancouver alone, the Crown corporation’s report for the first time suggests a key reason for the difficulty young adults have finding a place to rent in a metropolis where the vacancy rate is stubbornly stuck below one per cent.
The CMHC report’s insights on Canada’s changing urban rental markets are arguably even more significant than its findings on home ownership. The report revealed that the cities where non-permanent residents have increased most dramatically, in some cases quadrupling in number in two decades, are “experiencing some of the lowest (rental) vacancy rates in the country.”
Even though independent housing specialists say the CMHC report only captures a portion of the housing and rental spending by the more than 890,000 temporary residents who were in Canada in 2017, it provides evidence that international students and foreign workers are a major factor in the affordability crisis in Toronto and Metro Vancouver.
The federal government is increasingly stressing that international students and temporary workers (who make up the vast majority of what the CMHC calls “non-permanent residents,” or NPRs) deserve to go to the front of the immigration queue. Indeed, the CMHC report says more than one in five have already become permanent residents, which is the first step toward citizenship.
However, an unintended consequence of the doubling of international students across Canada to 353,000 (in 2015) is it has seriously affected the housing markets in the college and university cities to which the vast majority have moved — Montreal, Calgary, Edmonton, Toronto and Vancouver.
The CMHC report, titled The Rise of Non-Permanent Residents and Their Effect on Housing, says non-permanent residents account for one in five of all recent newcomers to Metro Vancouver.
The impact of such temporary residents on housing and rental units is even stronger among those aged 18 to 44. The CMHC data shows non-permanent residents account for 28 per cent of the growth of the millennial and gen-X generations in Toronto, and a whopping 46 per cent of their rise in Metro Vancouver.
The CMHC report, which confirms that the majority of temporary residents are renters who are young, dovetails with recent census data that shows there are only 350,000 renter households in Metro Vancouver, about one third of all households.
Rental units are not only sought after by the 140,000 temporary residents in the city, but also by many of the 30,000 immigrants that arrive each year. Some housing analysts say that for every 10,000 new residents into a region, a place like Metro Vancouver needs to add 4,000 to 5,000 rental units. Kishone Roy, chair of the B.C. Housing Rental Coalition, maintains B.C. already has a deficit of 150,000 urgently needed rental units.
“International students and other temporary residents are the main driver of rental prices in Metro Vancouver,” says Gary Liu, a Burnaby research scientist who works with Housing Action for Local Taxpayers.
While the contribution by temporary residents to the rental squeeze is of paramount concern, the CMHC report marks the first public analysis of the way many foreign students and temporary workers are buying properties in Canada. They account for 3.4 per cent of young adults’ mortgages in Toronto and almost five per cent of those in Metro Vancouver.
While housing analyst Stephen Punwasi, head of Better Dwelling, finds it strange that foreign students and non-permanent workers under age 25 are buying up houses and condominiums in Canada, the CMHC’s Scott said the trend can be partly explained by the way many international students are staying in Canada longer, preparing to become permanent residents and come from countries with a “stronger ownership ethic.”
The CMHC figures show foreign students and temporary workers are doing their buying at the middle and higher end of the housing markets in Montreal, Toronto, Edmonton and Vancouver.
A CMHC chart shows the average price of a detached house bought by a non-permanent resident in Metro Vancouver in 2016 was $1.65 million, while the average amount spent on an apartment was $535,000 and on a townhouse was $654,000.
Better Dwelling’s Punwasi said there are reasons to believe the new CMHC report, based on the evidence provided by the countries’ five major banks, offers only a hint of the affect of non-permanent residents on Canada’s urban housing and rental markets.
While it’s common sense that most temporary residents in Canada will opt to rent, Punwasi said the CMHC’s data does not capture the many foreign nationals and non-permanent residents who are widely believed to be buying property in Vancouver and Toronto through companies, or through sponsors who are Canadian citizens or permanent residents.