Ethnic diversity and immigration

According to demographic projections, the ethnocultural diversity of Canada’s population will increase greatly by 2031. The vast majority (96%) of Canadians belonging to a visible minority group will likely live in one of the 33 census metropolitan areas, and visible minority groups could comprise 63% of the population of Toronto, 59% of Vancouver and 31% of Montréal.

Canada’s increasing visible minority population is not the only aspect of diversity projected to change. Other aspects of diversity include foreign-born, generation status, mother tongue and religious denomination.

Diversity growing

According to demographic projections, the proportion of foreign-born people in the population could increase from 20% in 2006 to between 25% and 28% by 2031. Just over half (55%) could be born in Asia.

The proportion of foreign-born in the population could increase together with immigration levels. From 1991 to 2006, the average annual number of immigrants to Canada was 229,000, making the years 1991 to 2006 one of the longest uninterrupted periods of strong immigration since 1871. Over the same period, the proportion of foreign-born in the population increased from 16.1% to 19.8%. In contrast, over a 40-year period from 1951 to 1991, the proportion of foreign-born in the population rose from 14.7% to 16.1%.

From 2006 to 2031, the foreign-born population of Canada could increase four times faster than the rest of the population. The number of foreign-born Canadians could total between 9.8 and 12.5 million, depending on immigration levels. By 2031, nearly half (46%) of Canadians aged 15 and older could be foreign-born, or could have at least one foreign-born parent, up from 39% in 2006.

Diversity will grow among the Canadian-born population in coming generations regardless of future immigration, since the children and grandchildren of immigrants will add to Canada’s diversity.

Doubling of visible minority population

By 2031, if current demographic trends continue, 47% of the second generation (the Canadian-born children of immigrants) will belong to a visible minority group, nearly double the proportion of 24% in 2006. The proportion of the third generation (the Canadian-born children of the Canadian-born children of immigrants) or later generations belonging to a visible minority group, although low, will triple from 1% to 3%.

By 2031, 29% to 32% of Canada’s population—between 11.4 and 14.4 million people—could belong to a visible minority group, which is nearly double the proportion (16%) and more than double the number (5.3 million) reported in 2006. In contrast, the rest of the population is projected to increase by up to 12%. Sustained immigration, slightly higher fertility and a young population will bolster the visible minority population’s growth.

South Asians—the largest visible minority group—could represent 28% of the visible minority population by 2031, up from 25% in 2006, whereas the share of Chinese could decline from 24% to 21%. Chinese women have one of the lowest fertility rates in Canada, unlike South Asian women. Also, people born in China are more likely than South Asians to emigrate from Canada.

Canada’s Black and Filipino populations, which were the third- and fourth-largest visible minority groups in 2006, could double in size by 2031. The Arab and West Asian groups could more than triple—the fastest population growth among all groups.

More allophones, increasing religious diversity

Allophones (people whose mother tongue is neither English nor French) accounted for less than 10% of Canada’s population in 1981. By 2006, that proportion had risen to 20%; augmented by immigration, it could reach 29% to 32% by 2031. In other words, the number of allophones could rise 7 to 11 times faster than the rest of the population, to total between 11.4 and 14.3 million people.

Diversity is also increasing in terms of religious denomination. The number of people having a non-Christian religion is expected to almost double from 8% of the population in 2006 to 14% by 2031; about half of the non-Christian population would be Muslim, up from 35% in 2006. The proportion of the population with a Christian religion could decline from 75% to about 65%. The share with no religion could rise from 17% to 21%.

BMO Canadian Housing Outlook: Tailwinds and Headwinds Point To Soft Landing

Tailwinds include low mortgage rates, relatively low unemployment and strong immigration, while high prices, elevated household debt and slowing employment are cause for concern. - More buyers are turning to variable rate mortgages on expectations that rates could stay low for some time, or even decline. - Average Canadian house prices were a record two-thirds more than average U.S. house prices.

TORONTO, ONTARIO, Sep 30, 2011 (MARKETWIRE via COMTEX) -- After a decade of strong growth in the Canadian housing market, residential real estate is headed for a "soft landing" with prices moderating in the months ahead, according to a Special Report from BMO Economics.

Low interest rates have fuelled Canada's housing market in the past decade, pushing prices to new highs in most regions. Sales are now close to their past-decade norm, and well below pre- and post-recession peaks, while residential mortgage demand has also moderated. However, a weaker economy and new mortgage rules have dimmed activity recently.

"Since the prudent and timely mortgage rule changes announced early this year by Finance Minister Jim Flaherty, Canadian house prices have moderated," said Sal Guatieri, Senior Economist and Vice President, BMO Capital Markets. "House price gains are slowing. Although average resale prices rose a brisk 7.7 per cent year-over-year in August, the rate of increase has slowed from nearly 9 per cent earlier this year."

Mr. Guatieri noted in the report that housing activity should remain moderate in the year ahead, with tailwinds including low mortgage rates, relatively low unemployment and strong immigration. Furthermore, a weak global economy and Europe's debt crisis will likely keep the Bank of Canada on the sidelines until early 2013, while further easing measures by the Federal Reserve should suppress long-term rates in both countries, thereby supporting affordability.

On the flip side, Mr Guatieri noted that the housing market also faces several challenges, including high prices, elevated household debt and slowing employment.

"Prices have risen twice as fast as incomes in the past decade, lifting the current ratio 16 per cent above its norm. Although the current overvaluation is below levels that triggered price corrections in Canada in 1989 and the U.S. in 2006, it will remain a thorn in the side of first-time buyers," said Mr. Guatieri. He added that for bargain hunters, Canadian houses, on average, cost a record two-thirds more in local currency terms than properties in the U.S.

The upshot is that home sales are likely to remain steady in 2012 and prices should also stay put. However, the resource-rich provinces, notably Alberta and Saskatchewan, should outperform other regions since their economies are expected to grow the fastest. Because housing is moderately overpriced in most regions (and considerably so in Vancouver), it's vulnerable to a correction.

"Regardless of the current low interest rates, it is still important for homeowners or potential buyers to be prudent and stress-test their mortgage against a higher interest rate to ensure they can afford what they signed up for. Total housing expenses should not consume more than one-third of total household income," said Katie Archdekin, Head of Mortgage Products, BMO Bank of Montreal.

Ms. Archdekin added that Canadians need to be continually examining ways to reduce overall housing costs. "BMO has developed products, such as the low rate mortgage with a maximum 25-year amortization, that we believe are directly relevant to today's environment and specifically designed to help Canadian consumers manage their debt. Furthermore, the lower amortization can significantly reduce the amount of interest paid over the life of the mortgage."

Additional factors expected to affect the future of Canada's housing market:

        
        --  The biggest threat stems from the perceived one-in-three chance of a
            recession, and the attendant loss of jobs.
        --  Another risk, though far smaller, is if interest rates spike higher next
            year. Even a moderate 2 percentage point increase in rates would
            severely impact affordability. Low rates are a threat too, since they
            could cause the market to heat up again, only to correct when rates
            eventually rise.
        --  Mortgage growth is expected to moderate as Canadians turn more cautious
            in managing their debt. Despite slower personal credit growth, household
            debt hit a record 1 1/2 times disposable income in Q2, as residential
            mortgages continued to outrun income.
        --  Meanwhile, job and income growth should moderate next year, as the
            economy is expected to grow just 1.8 per cent versus about 2.2 per cent
            this year.
        --  More buyers are turning to variable rate mortgages on expectations that
            rates could stay low for some time, or even decline.
        
        

        
        Contacts:
        Matt Duffin, Toronto
        (416) 867-3996
        matthew.duffin@bmo.com
        
        Sarah Bensadoun, Montreal
        (514) 877-8224
        sarah.bensadoun@bmo.com
        
        Laurie Grant, Vancouver
        (604) 665-7596
        laurie.grant@bmo.com
 
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