Canada’s housing market appears to be “finally taking steps” toward a recovery, according to a new report released by RBC Economics.
The report points to a housing resale market that has been on a “winning streak since April,” while inventory levels have started to stabilize and home prices are showing early signs of finding their footing. Improved affordability and better job prospects could gradually strengthen consumer confidence and support further progress in the months ahead.
However, the pace and strength of the recovery will largely depend on whether Canadians who have postponed their home-buying plans decide to return to the market.
“The key to the outlook will be the extent to which sidelined homebuyers make their way to market,” Robert Hogue, assistant chief economist at RBC, said in the report.
“We think there could be hundreds of thousands of Canadians who put plans to buy a home on hold in the past several years due to sharp increases in ownership costs. Many of them are living longer than preferred in rented accommodation or delaying upsizing or downsizing current digs.”
According to RBC Economics, the recovery is unlikely to unfold smoothly or uniformly across Canada. Prolonged market corrections in Ontario and British Columbia are expected to continue influencing buyer sentiment, while markets that have proven more resilient may have limited room for further gains amid stable interest rates and slower population growth.
The condominium sector, meanwhile, could face a longer road to recovery. High inventory levels in Toronto and Vancouver, combined with weakening investor interest, are expected to put continued pressure on condo prices, potentially extending into next year.
Hogue said the market’s recent improvement has come too late to prevent a nationwide decline in both home resales and prices in 2026.
RBC expects home resales to fall by 3.6 per cent this year to 453,200 units. The benchmark price index is also projected to decline by 2.3 per cent to $794,200, following weak market conditions during the winter and early spring.
A more visible recovery is expected to emerge next year. Hogue forecasts that home sales could increase by 6.7 per cent to 483,600 units, while benchmark home values are expected to rise by 0.8 per cent to $800,700.
“An upturn of this magnitude won’t be transformative, while welcome,” the report said.
“The general tone of Canada’s market will still be soft with our resales projections far below levels before the pandemic and home values just a smidgen above the cyclical low.”
Interest rates are also unlikely to provide significant additional relief for housing affordability. According to the report, borrowing costs appear to be “as low as they will get this cycle.”
RBC Economics expects the Bank of Canada to maintain its current interest rates until the end of this year before increasing its policy rate next year.
Despite the improving outlook, RBC warned that a broad-based housing recovery remains far from guaranteed, particularly given the risks facing the Canadian economy.
Hogue specifically pointed to the recent escalation of the U.S. trade war and the ongoing conflict in the Middle East as factors that could once again undermine consumer and investor confidence.
“We’ve counted four false starts since 2023, with external events (think trade war or energy price spikes) derailing what promised to be lasting, albeit gradual, improvement. This time may not be different,” Hogue said.
Trade tensions between Canada and the United States remain a significant concern. On Aug. 22, the U.S. imposed tariffs of 50 per cent on roughly five per cent of Canadian exports, while Canada plans to respond with its own counter-tariffs beginning Sept. 8.
U.S. President Donald Trump has also threatened to introduce steeper levies on automobiles and auto parts starting Jan. 1, 2027.
As Canada’s housing market begins to show signs of renewed momentum, RBC’s outlook suggests that the recovery may finally be underway — but the path ahead remains fragile, gradual and vulnerable to economic shocks both at home and abroad.
