Another Canadian Real Estate Headwind: International Students Told To Delay Plans

Canadian real estate is seeing another demand side factor disappear – international students. Immigration, Refugees and Citizenship Canada (IRCC) data shows international student permit holders admitted, made a sharp decline in Q2 2020. The decline will continue into the fall, or drop further, as the government warns students may not be admitted due to the pandemic. Canada typically has hundreds of thousands of international students, which applies demand pressures on housing. With their extended absence, hundreds of thousands of homes will be sitting empty.

What’s Happening, and How This Impacts Canadian Real Estate

Canada has warned international students they may not be admitted into the country. Instead, the government is suggesting international students prepare for online lessons. Under the current travel ban, valid study permits may be denied entry, unless they can prove the travel is non-discretionary. Instead the government will apply online hours towards a work permit upon graduation. The government isn’t just telling people they can’t come, they are incentivising study abroad. All of this can have a big impact on real estate.

Every year Canada accepts hundreds of thousands of international students, creating demand for housing. Canada had 642,480 international students as of December 31, 2019. The largest schools also happen to be in the most populated regions, like Lower Mainland and Southern Ontario. This means the students are a demand side factor for a number of large real estate markets.

International students are typically renters, but it’s becoming more common to buy. Whenever there’s a demand-side increase, you apply pressure for prices to rise. In this case, they provide pressure for both rents and home prices. Here’s how quickly that demand is disappearing.

Canada’s International Students Declined Before The Pandemic

Canada has recently been issuing fewer international study permits compared to previous years. There were just 49,595 students issued permits in Q2 2020, down 40.54% compared to the same quarter a year ago. Previously, there was also a drop to 48,010 students in Q1 2020, down 25.35% from a year ago. One surprising factor is, this happened last year. There were just 77,395 students admitted in Q4 2019, down 2.55% from a year before. The pandemic clearly is having a huge impact, but declines began before the actual pandemic was known. This means there’s a little more to it than just a pandemic driven slowdown.

Canadian Study Permits Issued

The number of study permits issued to international students per quarter, across Canada.

Source: Government of Canada, Better Dwelling.

Ontario Is Seeing International Students Drop Faster Than Average

In Ontario, the rate of decline was just a little larger than the national rate. There were 24,000 students admitted in Q2 2020, down 42.0% from last year. The previous quarter saw just 20,280 admitted in Q1 2020, down 28% from a year before. Ontario represents almost half of all students admitted, and is a significant weight on the national trend.

Canadian Study Permits Issued By Province

The number of study permits issued to international students by quarter, in selected provinces.

Source: Government of Canada, Better Dwelling.

B.C. Was Seeing Fewer International Students Since Q4 2019

B.C. is seeing a smaller than national drop over the past two quarters, but also saw a significant decline at the end of last year. The province represented 12,510 of the students in Q2 2020, down 38.0% from a year before. The previous quarter represented 10,700 students, down 32.0% from a year before. Most surprising though is last year only saw 15,095 students in Q4, down a whopping 13% from a year before. Yes, the pandemic is responsible for the majority of the declines. However, BC was seeing a significant drop in Q4 2019, meaning the decline is more than just pandemic driven. The decline for the last quarter in 2019 is actually larger than the decline for the whole country.

Canadian Study Permits Issued Change

The year-over-year percent change in study permits issued to international students by quarter, in selected provinces.

Source: Government of Canada, Better Dwelling.

Quebec Was Seeing Fewer International Students Since Q4 2019

Quebec is another province seeing a decline of international students. The province represented 5,725 of the student permits in Q2 2020, down 42.23% compared to a year before. The previous quarter represented 10,190 of the students in Q1 2020, a modest drop of 3.4% from a year before. The final quarter of last year though only came in at 8,270 students, down 7.18% from a year before. The pandemic is definitely hitting the province’s student numbers, but this trend started a little before the pandemic.

No doubt the pandemic has driven international student numbers lower. The recent message to students means this will likely continue well into next year. The trend began before the pandemic though, likely due to the slowing global economy. These numbers further build on the decline in immigration seen in Canada’s largest real estate markets.

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  • Trader Jim 4 years ago

    Already seeing this in Vancouver. Companies that do lease arbitrage by renting units then assigning them to oversees students are seeing all of their money dry up.

  • Maurice 4 years ago

    We jokingly call it the “great reset.” Most student leases expire in August/September, so there should be flood of new rentals available for a year.

    Some agents that specialize in investors have told them if they can’t float 6-ish months or a reduction on rent, they should be looking to dispose of their rental for now.

  • zalzon 4 years ago

    Real estate flipping had become an industry in Canada with banks and flippers profiting from it in the way up all these decades.

    The banks got and will continue to get bailouts now that these junk mortgages are defaulting. Their losses essentially being shifted onto taxpayers, savers, pensioners through money printing, “stimulus” and other fancy terminology.

    The flipper however will be hung out to dry.

    Long live the flipper.

    • Fight Back 4 years ago

      Someone needs to hold the people in power responsible for propping up this bubble.

  • Mike 4 years ago

    These policy makers are running our country into the ground. Normalizing debt and deflating our currency. People in there 20s should not have to spend 750000 for a first home. I can’t believe how much has changed in the last 20 years. The Canadian Dream is almost over. Good to know politicians are getting a raise though thanks Justine.

  • SH 4 years ago

    Average rent in downtown Toronto condos is now back down to 2016/17 prices for bachelors and 1-bed (2-bed rents holdings up better). If we assume that a whole bunch of leases end in August, it suggest rents have a ways to fall before reaching a bottom. I’m seeing some bachelors in newer condos in prime areas now starting to crack down into the 14-handle (that is, rents of $14xx).

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