September 25, 2004
If Canada’s politicians want to protect the homes and property of Canadian citizens, Job No. 1 is opening Canada’s doors to immigrants.
Population growth is by far the largest driver of real estate appreciation – several times as important as interest rates and other economic fundamentals, reports the IMF in a release this week. Yet most Western countries, Canada included, have birth rates too low to sustain their existing population, and depend on immigration to prevent population decline. Without past immigration, our properties – typically our most important assets – would today be worth much less. With more open immigration, our properties would appreciate faster still.
The IMF’s findings, contained in its forthcoming World Economic Outlook, analyzed prices in an 18-country study covering more than three decades. It found that for every 0.25% increase in population growth, house prices appreciate by 1%. For Canada, which increases its population through one of the world’s highest immigration targets– the government aims to bring in about 300,000 immigrants a year, or 1% of our population – immigration alone could represent a hefty 4% appreciation in the value of our homes.
If the government were to aim higher and bring in 600,000 immigrants a year, our real estate values could be up by 8% a year due to immigration. Other factors that boost real estate – growing affluence and growth in credit – could appreciate our property further.
The benefits to Canadians’ property values from immigration are not felt evenly across the country, however. Most immigrants to Canada– about 75% of them – settle in just three cities, Montreal, Toronto, and Vancouver, giving homeowners there a real estate windfall.
Not so in many smaller cities, which have trouble attracting fresh blood and are in danger of stagnating. And not so in most small towns and rural areas, which don’t just stagnate – with their young leaving for larger centres, their old no longer reproducing, and outsiders no longer coming in, farmers often can’t find the help they need, communities are often in severe decline, and properties are often entirely unmarketable.
The federal immigration target is based on bureaucratic estimates of how many immigrants Canada can comfortably integrate into our economy. This target, because it is an average that in practice applies nowhere in Canada, is irrelevant. Some cities easily exceed the 1% target – the Toronto metropolitan area receives twice the national target – while most cities receive a small fraction of Canada’s immigrants and most towns and rural areas none at all. To add to the target’s irrelevancy, the cities that exceed the immigrant targets thrive while many that fall short suffer.
The government tells us that immigrants to Canada favour our cities because cities have more jobs, cities have more services, and cities have other immigrants to whom newcomers can relate. All this is true, but this explanation ignores the overriding reason immigrants to Canada avoid rural regions: Our government through its immigration point system discriminates in favour of affluent, well-educated immigrants who would tend to settle in urban areas.
The point system effectively bans rural workers – poor, uneducated farmers from Africa and Asia, for example – from entry to Canada. If Ottawa didn’t exclude those who would naturally seek out farm employment, Canada’s rural areas could be bolstered with immigrant workers for farmers who have seen their children leave, and can’t find affordable help.
Those poor, uneducated immigrant farm hands would soon acquire their own patch of land, build their own homes and become the next generation of farm owners, just as past generations of farmers helped build this country. In the process of looking after themselves, rural immigrants would benefit their neighbours by creating a market for rural land – raising rural land values just as urban immigrants raise urban land values.
By opening the door to immigrants of all occupational backgrounds, low skilled and high skilled alike, the federal government would be doing more than providing a boost to property values coast to coast. It would also be providing us with an insurance policy.
The IMF, in its recent report, found that some 40% of house-price movements stem from global factors, such as interest rates and changes in stock market values. If real estate is now overpriced, as the IMF warns, and a global correction takes place, Canada’s real estate, and the Canadian economy, would take a hit.
The hit would be cushioned, however, and perhaps entirely negated, if the government allowed more open immigration to protect our home and property.
A reader responds
Poor, uneducated immigrants can’t take on our farms
October 1, 2004
Re: Lawrence Solomon, “Thank immigrants for real estate gains,” Sept. 25. Mr. Solomon’s notion of allowing poor, uneducated farmers from Africa and Asia to immigrate to Canada in order to work on farms is a clear example of how little he understands the farming industry.
Modern farming requires both education and access to financial resources in order to maintain the operation, the two criteria Solomon is willing to waive. The small family farm has in many cases ceased to be a viable economic unit, hence the exodus of the sons and daughters from these farms. It hardly seems possible, then, that they could now support an immigrant family, as Solomon suggests.
In my part of eastern Ontario, hundred-acre farms and buildings typically sell for $300,000 plus. Dairy farms, if you can find them, can fetch a million and more. It would be interesting to know Solomon’s economic plan for a immigrant who would be working for minimum wage, and then magically they would, in Solomon’s words, “soon acquire their own patch of land.”
In the future Solomon might consider doing a little research before committing ideas to print.
Jeff Spooner, Kinburn, Ont.
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