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Canada’s new cap on international study permits should slow the increase in demand for rental units from foreign students by about half this year, according to the country’s largest lender.
The number of international students in Canada is expected to grow by 100,000 in 2024, or 55% less than the net increase last year, assuming similar enrolment rates and outflow patterns after the pandemic, Rachel Battaglia, an economist at Royal Bank of Canada, wrote in a note on Wednesday.
The impact on the rental housing market is expected to follow roughly the same lines, given that nearly all foreign students rent their homes. Battaglia estimates the slowdown in arrivals will translate into a halving of the increase in international students’ demand for new rentals this year compared with 2023.
If the visa cap is maintained at the current level beyond its 2025 expiry, the country could start to see a drop in the number of international students in 2026 as outflows surpass new arrivals.
“If this materializes, an outright decline in the number of international students in Canada would relieve rental market pressures more meaningfully,” she said. “In the meantime, post-secondary institutions and other stakeholders must find creative ways to grow the student housing stock amid challenges in quickly building new structures.”
Prime Minister Justin Trudeau’s government last month set an intake cap for international study permits at about 360,000 for 2024, or a decrease of 35% from last year, with the 2025 limit to be reassessed later this year. It’s an effort to quell public anger over a housing shortage exacerbated by an influx of foreign students and temporary workers.
The country’s vacancy rate for rental apartments dropped to an all-time low and rent increases climbed to a record high in 2023, data from the Canada Mortgage & Housing Corp. show.
Regional impact
The national cap is allocated to the provinces based on their population shares. It’s expected to be “most constraining” on Ontario and British Columbia, where foreign student enrollments outweighed the number of residents, said Battaglia.
Ontario has a 53% share of Canada’s total international student admissions but a 39% share of the Canadian population, while BC has a 19% share of foreign students but 14% of the country’s residents.
Both provinces are expected to see the number of foreign students remaining flat this year, helping to stall new rental demand.
The cap will also be restrictive in Atlantic Canada but to a lesser degree, she said, where she estimates a 10% pullback in foreign student demand for rental housing this year.
Battaglia doesn’t expect the cap to restrain rental demand in Quebec and the Prairie provinces.
