Canada’s Immigration Slowdown Brings Relief to Housing and Job Markets, TD Economics Finds
Toronto, October 29, 2025 — A new economic analysis from TD Economics suggests that Canada’s recent decision to slow immigration growth is already easing pressures on two of the country’s most strained sectors — housing and employment — while offering policymakers crucial breathing space to balance long-term sustainability.
The report, released on October 28, 2025, titled “Is the Dial-Back of Immigration Having the Intended Impact in Canada?”, examines how the government’s decision to limit the inflow of both permanent and temporary residents is reshaping economic conditions nationwide. Authored by Chief Economist Beata Caranci and Economist Marc Ercolao, the report concludes that while the slowdown has sparked mixed opinions, its early effects are largely positive for housing affordability and labour stability.
1. Housing Market Gains Breathing Room
For the first time in years, the Canadian housing market—especially rentals in major cities like Toronto, Vancouver, and Montreal—is showing signs of stabilization.
The surge in international students and temporary foreign workers had created a housing demand far exceeding supply, sending rents skyrocketing. With the moderation in population growth, TD Economics notes that purpose-built rental prices are expected to rise at a slower rate of just 3% to 3.5% in 2026, down from the rapid 6–7% growth recorded in 2024.
Had immigration levels remained at their previous pace, rents would have climbed by over 5.5% annually, TD estimates. That difference could save the average renter approximately $1,100 per year by 2027.
Even in condo markets, traditionally dominated by investors catering to newcomers, price pressures are cooling—particularly in Ontario and British Columbia, where large numbers of temporary residents previously competed for limited housing.
Experts believe that while reduced immigration isn’t a full solution to the housing crisis, it is providing a much-needed pause for developers to catch up with construction and supply.
“This isn’t a fix for structural land shortages,” the report cautions, “but it’s creating room for progress.”
2. Labour Market Showing Signs of Balance
After years of post-pandemic turbulence, the labour market appears to be stabilizing. During 2023–2024, immigration levels had surged to nearly four times pre-pandemic averages, temporarily filling gaps in key industries like healthcare and hospitality. However, by late 2024, job vacancies began to decline, while youth unemployment crept higher.
The federal adjustment—reducing the influx of new workers—has since helped restore balance. According to TD’s findings, if the earlier immigration surge had continued, Canada’s unemployment rate could have exceeded 8%. Instead, with lower immigration, the increase has been contained closer to 6.5%.
This moderation also encourages employers to invest in automation and workforce training, instead of relying solely on inexpensive labour.
TD stresses the need for a dynamic immigration strategy that aligns with economic capacity and skill gaps rather than maintaining constant high inflows.
“Immigration policy must remain flexible,” the report notes. “The goal is balance — not restriction.”
3. Consumer Spending Defies Predictions
Despite slower population growth, consumer spending has not declined. In fact, household expenditures in 2025 have remained steady compared to the previous year, supported by lower interest rates, increased domestic tourism, and savings built up during the pandemic.
TD attributes this resilience to a shift in the immigration composition. Between 2022 and 2024, 70% of newcomers were temporary residents, most with limited discretionary spending power. As that wave eased, per-capita spending began to rise again — and is projected to exceed pre-2022 levels by mid-2026, nearly a year earlier than expected.
“The reduction in immigration didn’t derail growth — it allowed other economic drivers to take the lead,” the authors observed.
4. The Bigger Picture — A Strategic Pause, Not a Retreat
The TD Economics report frames the immigration slowdown as a “timely reset” rather than a retreat from openness. While the move won’t fix Canada’s deep-rooted affordability and productivity challenges on its own, it’s offering valuable relief to citizens struggling with housing costs and job competition.
Key indicators summarized:
| Economic Indicator | Before Policy Shift | After Policy Shift | TD’s “What If” Projection |
|---|---|---|---|
| Population Growth | 3.2% (Q2 2024) | 0.9% (2025) | — |
| Rent Growth | 6–7% | 3–3.5% | Would be 5.5% without change |
| Unemployment Rate | Rising | Stabilizing | Could have hit 8% |
| Real Per-Capita Spending | Falling | Rising | Would recover by 2027 |
5. What Lies Ahead
As Canada prepares to unveil its 2026–2028 Immigration Levels Plan, policymakers are expected to continue walking a fine line — maintaining openness for talent and innovation, while protecting economic and social balance.
In the words of TD’s economists, “Immigration remains one of Canada’s greatest strengths — but even strengths must be managed wisely.”
If current trends persist, housing affordability may improve further through 2026, job markets could stabilize, and per-capita spending may continue its upward trajectory — signaling a sustainable, steady growth path for the country.
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