Canada’s housing market is set to rebound gradually after facing significant setbacks in the first half of 2025, according to a new forecast from the Royal Bank of Canada (RBC). A trade war earlier this year disrupted an emerging recovery, pushing resale activity to cyclical lows and weighing heavily on prices, particularly in Ontario and British Columbia.

RBC now projects national home resales will decline 3.5% to 467,100 units this year, with a 4.1% pullback in the first six months. “Recent signs of an ongoing recovery have emerged,” said Robert Hogue, RBC’s assistant chief economist, noting that easing economic concerns and lower interest rates are drawing buyers back into the market.

Firmer Demand but Lingering Challenges

The bank expects sales to rebound 7.9% to 504,100 units in 2026, though still below the pre-pandemic five-year average of 511,000. Several constraints—including a fragile labour market, reduced immigration targets, and ongoing affordability issues—are expected to temper growth.

RBC forecasts the national composite RPS Home Price Index will rise 0.7% in 2025 before declining 0.7% in 2026, with the steepest drops in Ontario and BC due to high inventory and strong competition among sellers.

Regional Price Trends Diverge

Balanced conditions in the Prairies, Quebec, and parts of Atlantic Canada are expected to support modest price gains in both 2025 and 2026. In contrast, imbalances in Toronto’s and Vancouver’s condo markets could spill into other housing segments, keeping prices under pressure.

Post-Pandemic Adjustment

RBC notes that the market is still adjusting from the pandemic-driven surge in activity fuelled by low interest rates, government supports, and changing housing needs. This acceleration pulled forward transactions that would have otherwise occurred later, leading to a correction after interest rate hikes in 2022.

Economic and Policy Factors

The trade war’s impact on the economy appears less severe than initially feared, with RBC expecting stronger growth in the second half of 2025 and into 2026. The unemployment rate is forecast to peak at 7.1% late this year before easing.

The Bank of Canada’s rate cuts since mid-2024 are expected to support demand, though further reductions are unlikely, with the policy rate projected to hold at 2.75% through 2026.

Affordability and Inventory Dynamics

Lower borrowing costs and moderating prices have improved affordability to its best level in three years, unlocking pent-up demand. However, ownership costs remain well above pre-pandemic norms in high-priced markets.

High inventory levels in Ontario and BC are expected to keep competition among sellers strong, while tighter supply in other provinces could help support prices as demand gradually recovers.

RBC : Canada’s Housing Market is Poised for A Gradual Recovery by Jonalyn Cueto | CMP