New limits to immigration could limit housing price upside, says Macquarie economist

Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow

Macquarie economist David Doyle provided a new forecast for Canadian home prices in the wake of new measures to limit immigration,

“The shift in federal immigration policy for non-permanent residents announced this week suggests a considerable moderation in population growth ahead - we estimate to 400K per year from 1 million per year in 2022 and 2023. While this should moderate demand growth, the record figures for 2022/23 have already resulted in a structural shortfall in housing … Despite this, challenges and risks remain. In particular the renewals of mortgages in 2025 and 2026.

“Mr. Pierre Poilievre’s commentary on tying international immigration to housing starts has been piquing our interest . So our primary intent is to quantify potential demand implications should a policy along those lines come to fruition . Bottom-line, recent focus has been on accelerating supply growth to address affordability, perhaps understating downside risk to the “D” part of the equation in 2025.

“The bulk of the equity performance so far this year, and indeed in the past 18 months, was driven by multiple expansion. Globally, 12m forward earnings are up only 7% from the lows, in contrast to nearly 30% P/E upmove … Current US forward P/E multiple of 21.

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