The Teacher Becomes The Student

Years ago, in the small town where I grew up, whenever someone did something very well for the first time, you might hear someone say ” the student has become the teacher”. Well, today, in Canada, I think that the ( drama ) teacher is about to become the student. 

Immigration Minister Marc Miller announced the new 2 year cap of foreign study permits today. Apparently it wasn’t a wise idea to have 800,000 new students coming into Canada when we lacked the housing, infrastructure, and healthcare to take care of them all. Anyone who took Grade 11 economics could have told you that, but politicians have never been ones to use facts and logic. After all, facts and logic do not get a person elected. Since bullshit baffles brains, we use that instead.

Now, I am not going to focus too much on the immigration announcement. It is what it is, as they say. However, I do want to look at what this could mean in terms of economics, and why I think that JT will come to rue the day they made this announcement. Fair warning, if you are a fan of the current governing party, you may want to stop reading at this stage. For the record, I not only dislike the current government, but really all politicians. I try not to make things political, but sometimes it cannot be avoided. If you read on – do so at your own discretion, and please don’t email me to inform me of all the good thing the Liberals have done.

Immigration has been a hot topic as of late, and everyone seems to think that everything wrong with Canada was caused by immigration. I don’t think immigration was the issue, it was the way it was done that became the problem. We all know, or ought to know by now, that Canada welcomed over 1 million people last year. That is a lot of people. However, when welcoming 1 million people into the country, one ought to make sure there is ample housing, food, healthcare and infrastructure to handle 1 million new people. Of course, politicians can’t see past the next election, so foresight was greatly missing. I don’t care if immigration was 10,000 or 10,000,000, if done correctly the 10,000,000 can have a wonderful outcome, but when done poorly, 10,000 can be a disaster. It turns out that it was a disaster, and the issues are showing up everywhere. So first the Liberals allowed all of these student Visa’s without proper oversight, infrastructure, or any accountability, but now it is going to say that the student’s coming were the problem? Great, right on pace with the current administration – cause the problem, then blame the problem on someone else, and then expect praise for fixing the problem you created.

Okay, so now that we have limited the student Visa’s, I anticipate that PR cards, etc will be next on the horizon. We have to get immigration down to levels that we can accomodate and provide for. Expect the government to expect praise for fixing that problem they created as well. Now, all of the inbred, hillbilly rednecks are happy today – they hated new comers because they are stuck back in the 1920’s and feel that anyone that isn’t their own somehow poses a threat. So all the rednecks will be celebrating today. However, not many people grasp what is at hand here. All over a lot of South-Western Ontario towns the entire market is driven by student housing. Small homes rented out by the bedroom, condo apartments in downtown centres, townhouses all over cities within a 20 minutes drive to a campus etc. etc. Well, if we drop students by around 500,000 a year, that drops demand for a lot of housing. Remember that move up buyers to the mid to high range have to first sell their entry level starter home to move up. A lot of buyers of the starter homes were landlords who would rent to students, and newcomers. If that piece of demand drops a lot – and quick, it can have a very profound impact on the market. All of a sudden rents come down, market rents on appraisals drop, and the house your client rents out is worth a whole hell of a lot less. Now, there is a lot of the population that are cheering this one – after all ,they want prices to drop so they can finally buy a home. However, for every person that gains with a lower price – one person loses the equivalent amount. It is a zero sum game. For every winner, there is a loser, and for every loser there is a winner. The numbers change, but no one is up or down any more or less money at the end of the day.

JT and his gang are about to find out that for every person they made happy today, they have probably pissed off another one. There is no religion in Canada with a greater membership than that of the housing cult. Anytime you do, or say anything that goes against the housing cult, you feel their wrath. When student numbers drop, and probably immigration as a whole, you will have killed the bull case for real estate to the moon, rocketship emoji’s etc. The only glimmer of hope that every realtor was using was ” 1 million immigrants a year , housing has to go up “. Pissed off people tend to vote out the incumbent at the next election, not that JT was winning in any sort of poll, but it could be the final blow to his re election. 

I feel that this type of event ( reduced immigration ) will continue Canadian real estate on the long trudge of lower prices, longer list times, and a general malaise for a couple of years to come. It took a few years for immigration to jack pricing, and it will take a few years to correct back down to where it should be. Again, for some that is good, and some that is bad, but it will take months, and probably years to filter down though the major metro areas ( T.O., GVA, GTA ), and down to the cities ( Kitchener, Calgary, Winnipeg ), and then down into the towns, and then villages and the countryside. Like a meth addict trying to get clean, it will be a slow go.

The other reason I really feel that todays announcement is for the worse, and not for the better is just the timing. Everytime ” the government ” passes a law, takes a stand, makes a new rule, it is always at the exact wrong time. Governments always have some bullshit vision statement they use, you know, things like ” Vision for tomorrow”, or ” Seeing beyond”, or ” Open for Business”. Well, they should all just use the statement of ” Perfecting the art of closing the barn door just as the horse escapes”. Governments have always been a huge contrarian indicator to me. When did they decide to change the US Banking system? Oh yeah, 2009 after the collapse of the entire banking system. When do they decide to implement tougher standards for airplanes? After a crash. You get the idea. The Liberal party had years to bring today’s announcement down when it would have actually helped keep the stupid insane market at bay. House prices have fallen from the peak, house prices are continuing to fall, and a lot of indications say they will fall in the future. Dropping demand now isn’t needed. Dropping the demand for housing would have been an A plus move in 2020, 2021, maybe in 2022. Of course, politicians are about as sharp as a bowling ball, so they do it at the start of 2024. By the time the government gets around to implementing any rule, or law, the free market has fixed itself, or is in the process of healing. Of course, the government can now claim they fixed it, take the credit, and use that point in their upcoming campaign. 

Student Visa applicants were falling precipitously before todays announcement, as international students no longer view Canada through the same lens they used to. The India blunder last year has dropped the new Indian students coming to Canada, and that was a large portion of the international student applications. However, if the government was to announce that not many international students want to study in Canada, Canadians might have questions. So now we reduce the number of Visa’s, so optically it looks better. I supremely hope that Canadians are smarter than that, but I have some doubts.

Either way, I think this will blow up in JT’s face, and I think that they entire Liberal party will go down with him. JT is about to be schooled by the economy, and it won’t end well.