TORONTO – The effects of slowing population growth are beginning to emerge in some sectors of the Canadian economy, more than a year after the federal government reduced its immigration targets. 

This year, as highlighted in the latest federal Immigration Levels Plan (here our previous article), is likely to be the second consecutive year without population growth, following the reduction in targets, including international students and temporary workers, implemented sixteen months ago. Fewer people in the economy generally mean lower overall spending, including in the rental and housing markets.

One of the most visible effects is on the rental market, explains Shelly Kaushik, senior economist at BMO Capital Markets, to The Canadian Press. “One of the fastest effects we’ve seen is deceleration in rental prices across the country, but especially in places like Ontario and (British Columbia), where there is and was certainly a larger share of international students coming into the country,” she said.

According to Rentals.ca and Urbanation, asking rents in Canada fell 2 percent year-over-year in January, marking the sixteenth consecutive month of annualized decline. Marc Ercolao, economist at TD Bank, predicts that rental prices could remain stagnant until 2028, when population growth is expected to normalize. “You’re getting this period of a real stagnation in the housing market through this year and into next year, in part driven by population,” he said to The Canadian Press. Ercolao notes that the drop in demand is also affecting the secondary rental market and the slowdown in investor activity, which could restrain new construction.

Cynthia Leach, deputy chief economist at the Royal Bank of Canada, emphasizes that, although this is a one-time adjustment, Canada has never before experienced a population decline of this magnitude. “That could have an effect on how people perceive the strength of the economy and their willingness to spend,” she warns, speaking to The Canadian Press.

Kaushik adds that economic growth is slower than it should be: part of potential output depends on population growth, and if that slows, potential growth slows with it. The numbers support this: Statistics Canada reports that real GDP grew 1.7 percent in 2025, down from 2 percent in each of the previous two years, marking the slowest pace of annual growth since 2016, excluding the pandemic period.

Photo by Maria Ziegler on Unsplash

Files from The Canadian Press / CTV