Canada’s housing market remains caught between correction and recovery, with a genuine rebound unlikely to take hold before 2027, according to a report from RBC published last week.
The bank noted that home resales have been trending upward since April, with inventory levelling off and prices stabilizing or falling more slowly than before. RBC said improving affordability and better job prospects are helping to restore confidence and gradually unlock pent-up demand while working down accumulated inventory. However, the bank cautioned that this progress will not be smooth or consistent across the country, noting that the extended downturns in Ontario and British Columbia have left lasting damage to buyer sentiment that will take time to repair, while other more stable regions have limited room for further gains given steady or rising interest rates and stagnant population growth.
Despite the recent uptick in activity, RBC still expects a national decline in 2026, projecting home sales will fall 3.6% to 453,200 units and the benchmark price index will drop 2.3% to $794,200. The bank attributed this mainly to the weak start to the year.
RBC expects the recovery to become more evident in 2027, forecasting a 6.7% increase in home sales to 483,600 units and a 0.8% rise in the benchmark price index to $800,700. Even so, the bank said the overall tone of the market will remain soft, with resale activity still well below pre-pandemic levels and prices only marginally above their cyclical low point.
One factor supporting RBC’s cautious optimism is the buildup of pent-up demand from the prolonged downturn. The bank estimates that as many as 400,000 household formations may have been delayed since 2019. RBC also suggested that once the market begins to turn, momentum could build on itself, as buyers respond to a growing sense of urgency and rising transaction activity absorbs available inventory, reinforcing further demand.
RBC also said it believes interest rates have reached their floor and will not fall further. The bank forecasts the Bank of Canada will hold its policy rate — currently at 2.25% — through the end of this year before raising it in 2027 as economic conditions improve.
Regional differences are expected to be significant. British Columbia and Ontario, which have experienced the steepest declines, are projected to see larger swings next year, while more stable regions such as the Prairies and Atlantic Canada are expected to see moderate shifts.
RBC forecasts home sales in British Columbia will fall 4.6% in 2026 before rising 7.8% in 2027. Ontario is expected to see a 0.5% decline in 2026 followed by an 8.2% increase in 2027. Manitoba is projected to decline 4.2% in 2026 — from a much smaller base — before rising 3.8% in 2027, while Quebec is expected to fall 4.5% in 2026 and increase 4.0% in 2027.
RBC said it expects Ontario and B.C. to gradually emerge from their prolonged slumps as affordability improves, even though it would still be starting from among the weakest levels on record. Meanwhile, more modest sales rebounds anticipated in Saskatchewan, Manitoba, Quebec and parts of Atlantic Canada reflect steadier ownership costs, less pent-up demand to release, and slower population growth in those areas.
The bank noted that these projections apply primarily to single-family homes and townhouses, and less so to the condominium market, which it expects will take longer to recover due to excess inventory in major markets like Toronto and Vancouver, along with continued investor hesitancy.
RBC cautioned that the anticipated recovery is not guaranteed given ongoing risks to the Canadian economy. The bank pointed out that there have been four false starts in the housing market since 2023, each derailed by external shocks such as trade disputes or energy price spikes. It warned that similar risks — including an escalation of the trade war with the United States or conflict in the Middle East — could again undermine confidence. Domestically, RBC said cuts to immigration or persistent affordability challenges could pose greater obstacles than currently expected, potentially prolonging the market’s on-again, off-again pattern. Even under favourable conditions, the bank said it expects the recovery to be uneven, with regions advancing and retreating at different times.
This article references reporting from: