Canada home prices

Canada is one of the most-overvalued housing markets in the world relative to income and there's currently a harsh correction ongoing. That should weigh heavily on the Bank of Canada decision today, in large part because it was Macklem that helped to fuel the bubble when he promised to keep rates low for a long time.

However even with another rate hike, a crash isn't necessarily coming.

CIBC is out with a report today looking at housing and immigration trends. Canadian PM Trudeau pledged to dramatically increase immigration to Canada and the effects are already evident, with rental housing shortages everywhere.

CIBC today estimates the number of non-permanent residents arriving in Canada and pegs it at 258K in 2021, "no less than 700K" in 2022 and as many as 1 million this year.

"It’s not a stretch to suggest that the number of new international arrivals in 2023 might reach one million. This kind of inflow suggests that existing policy tools will easily fall short of addressing the current and future increase in housing demand. At the minimum, short-term housing solutions are needed to accommodate the upcoming unprecedented surge in the number of new arrivals," CIBC writes.

Canada arrivals

In terms of policy, the nightmare that could unfold is that higher rates push people from their homes but also leaves them nowhere to live.

I strongly suspect the next election will be fought over immigration.