December 22, 2025 | Going (Staying) Home

Happy Monday Morning!

Human QE is over. Canada’s population outright contracted in Q3, shrinking by 76,000 people. This was the only quarterly decline on record outside the pandemic.

BMO’s economist Robert Kavcic summed it up well.

“A major population adjustment is well underway, and it remains one of the biggest economic stories in Canada. Among the impacts we’re tracking are: a significant weakening of the rental market, especially with the pipeline chock-full of supply; less pressure on services inflation; easing slack in the youth job market; and a likely pickup in productivity and growth in real gross domestic product per capita.”

The dramatic shift in immigration comes after a promise from the Liberal government to reduce the number of non-permanent residents from 7% of the population down to 5%. This would require population growth to run near zero for the next two years. In other words, after running population growth at one million per year for the past few years, we’re now taking it to zero.

Are you paying attention yet?

Let’s turn back the clock to the election earlier this year when Carney said,

“Caps on immigration were put in place as a consequence and those will remain in place until we’ve expanded housing…”

Expansion commeth.

The private sector is ramming through an alarming rate of new rental construction at a time when non-permanent residents (renters) are being told to go home.

It’s no coincidence that Vancouver’s vacancy rate just hit a 30 year high at the same time the population contracted for the first time ever in BC.

And so we have a situation today where vacancies are surging, and rents are plummeting. This is great for affordability, but problematic for balance sheets that were underwritten when immigration was booming. Remember, it’s not just developers and landlords bracing for impact, but the tax payer funded CMHC as well. They have pushed their exposure in the rental construction business from 5% in 2017 to nearly 90% today!

An abundance of new housing supply, combined with a dramatic curtailing of immigration is bringing us closer to affordability, once price cut at a time. It tastes awful, but it works.

Rents are falling and so too are purchase prices. Data released from CREA last week reminded us the housing downturn is still ongoing. The number of homes sold nationally fell 0.6% in November from the month before, and the benchmark price fell another 0.4% bringing the current peak to trough decline to 21%. A historical slide.

On a more positive note, falling home prices means affordability is coming back down to earth. According to National Bank, Canadian housing affordability posted a seventh consecutive improvement in Q3 2025. The mortgage payment on a representative home as a percentage of income fell 1.5 percentage points.

Given what we have outlined above, immigration policy seems unlikey to change next year, and housing that’s already in the construction pipeline can’t be halted now. It seems logical to conclude that affordability shall improve further in 2026.

Let’s watch.

Steve Saretsky December 22nd, 2025

Posted In: Steve Saretsky Blog

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