Canada slashed migration and housing costs dropped. There may be lessons for Australia
Canada’s decision to radically cut migration levels and slash the number of foreign workers and students in the country has delivered on its goal of reducing housing costs, experts say. In the grip of a post-pandemic surge in overseas migration that was judged to be contributing to unaffordable housing and stretched public services, the Canadian government under former prime minister Justin Trudeau in late 2024 tabled a law that cracked down on foreign arrivals. The plan for the first time targeted not just the permanent immigration stream, but included caps for new temporary residents, and specifically international students. The radical move for a country that has long welcomed overseas arrivals has smashed universities that had become reliant on foreign students to plug funding gaps, and raised concerns about labour shortages in industries such as the care sector. But with the country’s population now shrinking for the first time since the 1940s, experts say the impact on housing costs has been undeniable.
Average asking rents across all properties in year-on-year terms have now been falling for 17 straight months nationally, according to Rentals.ca. The impact on home values has been more muted, but prices for apartments in some big cities have dropped by as much as a third as demand from foreign students in particular disappears. Canada has long been a welcoming nation for migrants, and between 2001 and 2025 experienced the fastest population growth among major advanced economies.
The country’s population grew by about 400,000 per year over the two decades leading up to the pandemic. Alongside the many benefits, however, the influx of people placed pressure on housing and services and exposed a lack of planning. Then there was an explosion in non-permanent resident arrivals in the wake of the Covid period that further soured attitudes towards migration.
After 2021 annual population growth peaked at nearly 1.2 million people in 2023, and, like in Australia, Canada’s “natural” growth of births minus deaths accounted for a tiny share of that growth. More than half of Canadians surveyed in late 2024 said they thought too many immigrants were coming into the country, with housing affordability cited as a key reason for this view.
‘Oh, shit, what have we done?’ Steve Pomeroy, a Canadian housing expert and professor at Ontario’s McMaster University, calculates that the average population growth over the first two decades of this century would have required 160,000 net new homes per year to match the growth in new households. In contrast, the post 2021-surge in residents required 490,000 homes – or triple the level of homebuilding. The building industry was always going to struggle to meet this sudden shock; it typically takes three to five years for the construction sector to respond to changes in demand, Pomeroy says.
With temporary migrants accounting for the lion’s share of this increase, the pressure was felt primarily in the rental market, which was “overwhelmed”. “The temporary foreign worker and the international student parts of the system were massively under-managed, or not managed at all.
“We’ve got 4.8m rental units in Canada. You bring in a million new people in one year on the market and that’s why you had that big, big increase in rents. “And then, of course, everybody says, ‘Oh, shit, what have we done? Let’s back up real fast.’” Rising rental vacancy rates have dragged on apartment values, which had had a knock-on effect to home prices more broadly. Pomeroy says that, overall, slashing migration levels has had a positive impact on the housing market and affordability. But there have been less welcome consequences, most notably for universities which are closing down programs as their foreign student fee revenue collapses. “When you have an excessive move in one direction, as the pendulum swings back, there will be some impacts from that correction. But I think, in the main, it has helped to moderate house price increases and to moderate rents.”
The affordability crisis Carolyn Whitzman, an adjunct professor at the University of Toronto and a leading housing researcher, says it is important to recognise that the collapse in migration has not solved Canada’s chronically unaffordable property market. Rents have dropped by 3% to 5% over the past two years, she says, but that is in the context of huge increases since the start of the pandemic. “There is no city in Canada where a two-bedroom apartment is affordable for, say, a full-time minimum wage worker. And there’s virtually no city in Canada where a one-bedroom apartment is affordable to a single person earning minimum wage, so we’ve still got a huge affordability problem.”
The collapse in temporary migration, focused on international students, has also triggered “huge” price falls in condominium values – in some cities in the order of 35%. “Prices have been declining in Canada. Absolutely, it’s co-related with a huge drop in immigration,” she says. But again, the $C700,000 ($A720,000) asking price for a one-bedroom studio apartment in Toronto or Vancouver is still unaffordable for any except the top income earners, or those who had inherited property. In other words, high migration is not the reason many Canadians struggle to afford their rent, or despair of ever owning a home.
“Immigration itself isn’t a problem, Whitzman says. “Planning that doesn’t take immigration into account is a problem. There should have been, at the very least, a lot more student housing money, which there wasn’t. “So you know, as crisis management, it [the change in policy] worked out. I won’t say it worked out by coincidence, because the cause and effect was fairly straightforward. But there was very little evidence behind it.” ‘Both societies are ageing societies’ Having lived in Australia between 2003 and 2019, Whitzman says the conversations around migration in the two countries are strikingly similar. “In the broadest sense, both societies are ageing societies. They need workers. They need cheap workers. “They need folks to, you know, be in the service sector to pick fruit or work in hospitals. But they aren’t providing enough housing for people to live in cities and be essential workers.” Nathan Janzen, the assistant chief economist at the Royal Bank of Canada, says the dramatic boom-to-bust swing in migration of the past few years is “unprecedented”. “We have seen ebbs and flows, and we have seen waves of immigration before, but not to this extent.” Janzen says it is “fairly widely recognised here that immigrants bring huge benefits, and that there are costs to reducing the levels” – not least that migrants typically bring much needed youth to ageing populations. Cuts to Canada’s permanent migration stream have not been as severe, and there have been carve-outs for agricultural and construction industries which rely heavily on temporary workers. “It has been viewed as an adjustment – a pause to let housing supply and public services catch up,” Janzen says.
Economic growth is determined by the three “Ps” – population, participation and productivity. Canada’s total population is expected to shrink in 2026 for the first year on record, which will drag on how quickly real GDP expands. But Janzen says “what really matters is how each individual household or worker is doing”. The economy expanded through 2023 and 2024 as the population boomed, but Canadians were struggling. “We essentially had a per capita GDP recession over really a couple of years and a two percentage point rise in unemployment” to around 7%, Janzen says. In contrast, while GDP growth didn’t look strong in 2025, “under the surface we had the first per capita gain, and that’s what really matters for the typical household”. The weaker jobs market also meant the country was slashing migration when the economy was not struggling with labour shortages. Janzen says demography mattered more than simply the number of people in the country. “It’s tied more to the average age of the population than to the size of the population. If all that is changing is the population, then government revenues fall, but so do the expenses. “And because immigrants tend to be younger, what happens when immigration falls is that the ageing funding gap that is present in virtually every advanced economy grows wider.”
