The Canadian government’s decision to significantly reduce immigration starting in 2025 is poised to bring dramatic changes to the real estate market. With population growth slowing for the first time in decades, The Canadian housing dynamics could shift in surprising ways. Here’s what you need to know about how these changes might impact the real estate landscape.
 

A Historic Shift in Immigration Policy

Starting in 2025, Canada plans to cut permanent residency admissions by 20% and reduce temporary resident admissions by nearly half a million over the next two years. This marks a dramatic change, moving from an annual increase of 1.2 million people to nearly zero. For the first time since the 1950s, Canada could face a population decline, which could ripple across the economy and housing market.

Economic Impact of Reduced Immigration

A significant portion of Canada’s GDP growth is fueled by immigration, but with fewer newcomers, economic growth projections are expected to dip from 2-3% to around 1%. While this opens the door for the Bank of Canada to lower interest rates, it could also bring challenges, particularly for real estate.

The Impact on the Rental Market

Toronto’s rental market has already seen a decline in demand since early 2024. With immigration cuts on the horizon, this trend is likely to continue. Lower demand has extended the time it takes to fill rental units, especially in smaller, affordable multiplexes often rented by newcomers.

Adding to this, falling interest rates and new incentives from the Canada Mortgage and Housing Corporation (CMHC) for secondary suites and multiplexes are expected to increase the rental supply. These factors combined are likely to place further downward pressure on rents in the coming years.

A Silver Lining for First-Time Homebuyers

For first-time buyers, there’s good news. Falling interest rates, reduced down payment requirements, and government incentives to boost housing supply are making homeownership more attainable. Lower monthly mortgage payments and a better balance of supply and demand could offer buyers an opportunity to enter the market with greater ease. Recent surveys suggest growing optimism among first-time buyers, signaling a potential increase in home-buying activity in the short to medium term.

What About Real Estate Investors?

The investor market is facing a more cautious outlook. While lower interest rates might attract some attention, falling rents and reduced appreciation potential are expected to temper investor enthusiasm. Investors will need to focus on fundamentals, such as positive cash flow and long-term equity building, rather than short-term speculative gains.

For Toronto condos, which have traditionally been driven by appreciation, a decline in speculative activity could bring more stability to the market. Those willing to adopt a hands-on approach—such as renovating older properties for rental income—may find opportunities for strong returns.

Opportunities in Multiplexes and Freehold Properties

Despite the challenges, there are still opportunities for savvy investors. For example, a 2-unit bungalow in Toronto priced at $900,000 and requiring $330,000 in renovations could yield $1,000 per month in positive cash flow after expenses. Lower interest rates and falling prices create a favorable environment for cash-flow-focused investments.

A Return to Market Fundamentals

As the market adapts to these changes, a more balanced and sustainable approach may emerge. The emphasis will likely shift to steady rental income, stable appreciation, and long-term growth. While the short-term effects—especially in the rental market—might feel chaotic, these adjustments could ultimately lead to a healthier real estate landscape.

How We Can Help You Navigate the Changes

Whether you’re a first-time buyer or an experienced investor, navigating the shifting Toronto/GTA real estate market requires expertise. Our team specializes in helping investors find opportunities in multiplexes and freehold properties. From identifying the right property to managing renovations and leasing, we’re here to guide you every step of the way.