RBC Housing Demand Study | Study permit cap will slow growth in some provinces

(Ottawa) The cap on the number of new study permits recently announced by the federal government will not “immediately” lead to a reduction in demand for rental housing from international students, but it could do so at longer term, reveals an analysis by the Royal Bank of Canada (RBC).

Ottawa announced in January that the number of new study permits will be capped over the next two years. The government is thus trying to curb the strong growth in international student enrollment in the country’s post-secondary educational establishments.

The number of new visas issued this year will be capped at 364,000, down 35% from the nearly 560,000 permits that were granted last year.

In its analysis, RBC argues that the cap imposed by the federal government will not immediately reduce the demand for rental housing from international students, but that it is expected to slow its growth “significantly” in 2024.

“Even though the number of international study permits will be limited in 2024 to approximately half of what was issued in 2023, this is unlikely to translate into an immediate decline in the total number of international students in Canada,” he said. explained economist Rachel Battaglia, who wrote the report released Wednesday.

“And for this reason, it is unlikely to result in an outright decrease in the number of rental accommodations requested by international students in Canada this year. »

In his analysis, Mme Battaglia added, however, that if this year’s cap remains in effect after it expires in 2025, the number of international students in Canada would eventually decline, as would the number of rental accommodations these students need.

“In the meantime, postsecondary institutions and others must innovate to increase the stock of student housing, despite the challenges of rapidly constructing new buildings,” she warned in her report.

Furthermore, not all provinces will be affected in the same way, since the federal government has distributed the national ceiling according to the provincial population.

Thus, the constraints will be greater in Ontario and British Columbia, which pushes RBC to predict that the number of international students in these two provinces will remain relatively stable this year, which will lead to stagnation in new rental demand by foreign students.

In the Atlantic provinces, the cap could result in a 10% decline in rental housing demand from international students in the region in 2024, according to RBC.

In Quebec, RBC does not expect the cap to restrict demand for rental housing, much like in the Prairie provinces.

Tight rental market

The federal government’s immigration policies, including the international student program, are facing increased scrutiny as the country experiences rapid population growth.

This demographic growth, fueled by permanent and temporary immigration, has increased pressure on the real estate market.

Rent prices in Canada skyrocketed last year as supply struggled to keep up with demand. This led to the lowest national vacancy rate recorded since Canada Mortgage and Housing Corporation began tracking this data in 1988.

In a report released in January, Canada’s national housing agency revealed that the vacancy rate for purpose-built rental apartments was 1.5 per cent during the first two weeks of October 2023, or at the time when it carried out its annual survey.

This proportion is down from 1.9% recorded a year earlier, which at the time represented the lowest national vacancy rate in more than 20 years.

Data from Rentals.ca and market research firm Urbanation showed that the average asking rent in December in Canada jumped 8.6% year over year, reaching a record high of $2178 per month.

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