Canada's Changing Immigration Landscape and Its Effect on the Housing Market

In recent years, Canada has witnessed a notable shift in its immigrant population's tax filing behaviour, which is raising questions about its impact on the real estate market. Statistics Canada's data reveals a surprising trend: a significant proportion of immigrants who arrived in 2019 have ceased filing taxes. This phenomenon is not entirely new, but its acceleration is noteworthy.

The Trend of Declining Tax Filing Rates

The data indicates that 91% of immigrants who arrived in 2019 filed taxes in their year of arrival. However, by the tax year 2021, this number dropped to 85.5%. Comparatively, immigrants who arrived in 2017 showed a similar pattern, with an initial filing rate of 91%, declining to 85.1% by 2021. This trend is not limited to these cohorts. Immigrants who arrived in 2011 began with a 92.7% filing rate, which decreased to 85.7% by 2017. These figures suggest an accelerating trend of tax filing drop-offs among recent immigrants.

Historical Context and Its Implications

Historically, Canada experienced higher tax filer retention rates. For instance, immigrants arriving in 2007 had a 94% initial filing rate, which remained relatively high at 86.1% a decade later. The recent decline in tax filer retention, especially among the 2019 cohort, is significant and unprecedented.

Potential Reasons Behind the Trend

Several factors might contribute to this declining trend. High shelter costs in immigrant hubs like Toronto and Vancouver are a potential factor. A survey of recent immigrants indicated that high housing costs have led to regret and contemplation of leaving Canada. Additionally, complexities in tax laws, such as the departure tax, might also discourage immigrants from notifying authorities about their departure.

Real Estate Market Impact

The implications of this trend for Canada's real estate market are multifaceted. If a substantial portion of these immigrants are leaving Canada, their departure could reduce housing demand, particularly in cities that are popular immigrant destinations. Additionally, those who remain but are outside the formal credit system may have limited influence on the housing market due to their inability to invest significantly or obtain mortgages.

The declining tax filing rates among recent immigrants in Canada present a complex scenario for the real estate market. It highlights the need for a deeper understanding of immigrant behaviors and their long-term plans, which can significantly influence housing demand and market trends. As Canada continues to navigate these changes, staying informed about these trends is crucial for real estate professionals and investors.