National Bank urges more immigration, foreign buyers to clear unsold housing inventory

The National Bank of Canada says a record number of newly built homes are sitting unsold and is urging the federal government to increase immigration and reintroduce foreign buyers to help developers clear the backlog.

"The inventory of completed and unsold housing units across all census metropolitan areas stands at 20,700 units, its highest level since records began in 1990," the bank warned in a new report.

It said over one in four, or 28 percent, of newly completed homes remain unsold.

READ MORE: Report warns Canada's housing push at risk from low apprenticeship completion

READ MORE: RBC warns Canada's housing affordability gains are stalling

"This demonstrates that the market is so weak that it requires public support," the bank wrote.

The report cites Ontario's $1.3 billion bailout to help investors buy 2,200 unsold Toronto condos and a joint $1.45 billion program from Ottawa and British Columbia for roughly the same number of condos.

"These programs are massive, but even taxpayer-funded bulk buying isn’t enough to clear the backlog," the bank noted.

It argues more demand must be drummed up from outside Canada's borders, as young adults struggling with shelter costs cannot afford to buy a home.

"In that context, we believe Ottawa should recalibrate its immigration policy through a targeted and gradual increase in immigration levels," said National Bank.

The bank warned that reducing non-permanent residents to five percent of the population by 2027, as planned, would slow total population growth to 0.2 percent in 2027 and 0.1 percent in 2028.

"In that context, we believe Ottawa should recalibrate its immigration policy through a targeted and gradual increase in immigration levels," says National Bank.

It also called for the federal ban on foreign home purchases, set to expire on Jan. 1, 2027, not to be renewed.

"The ban on foreign home purchases, which expires on January 1, 2027, should not be extended but rather replaced by a more flexible policy," explains National Bank.

"We believe it should not be renewed in its current form and that a more flexible model, such as Australia’s, which notably allows foreign buyers to purchase new homes, would help reduce the inventory of unsold housing," argues the bank.

The report notes that while Canada elected Prime Minister Mark Carney, who recently laid the groundwork for a "controlled increase" in the population, he has not addressed the foreign buyer ban directly.

Seasonally adjusted sales of existing homes saw a monthly drop of 2.3 percent in September, sliding 13 percent below the 10-year average, the bank said.

It noted that while Canadian home prices are now in the biggest correction on record, the almost five-year slump only rolled back 13 months of price gains.

The bank's call for more demand from abroad comes as young Canadians struggle with affordability.

A recent RBC report found the average first-time buyer plans to buy at age 41, 12 years later than current owners did, and that parents are increasingly helping adult children pay bills, a trend most parents attribute to a soaring cost of living.

With files from Better Dwelling