Posthaste: Higher interest rates and hotter housing hazards of Canada's population boom, warns TD

financialpost.com:

Good morning,

Canada’s population is booming, but a new study by TD Economics questions whether the sudden influx has gone too far, too fast.

The country has gained 1.2 million people over the past year, more than double the pace in 2019 and the years before. While this has bolstered the labour market and economic growth, TD economists led by Beata Caranci say it comes with a cost.

“While population growth is a good thing and a necessary remedy to aging domestic demographics, the benefits erode if it occurs too fast relative to a country’s ability to plan and absorb new entrants within the economic and social infrastructure,” said the economists.

The surge of people coming into the country through higher immigration targets and temporary foreign workers programs is expected to continue through this year at least, suggesting that 2023 will be another “one-million person year, and quite possibly higher,” they said.

“For years, economists had been warning that aging demographics would throw the economy off-kilter by straining economic growth, tax revenues and the social system,” the report said.

“A ramp up in skilled-based immigration offered a solution. Government policies have delivered, but now the question is whether the sudden swing in population has gone too far, too fast.”

The most commonly identified pressure point is housing, which was already facing an affordability crisis.

TD estimates that if the high-growth strategy continues it will widen the housing shortfall in Canada to 500,000 units in just two years, despite government efforts to increase supply.

“This cautionary tale of housing pressures can be applied to many other parts of society, from social systems to health care to physical infrastructure.