We’re a short jump past the midway point of the year, and the Canadian real estate market has remained stubbornly weak, with real recovery not expected until 2027, according to a report published last week by RBC.
“Home resales have been on a winning streak since April, inventory has levelled off, and prices appear to be stabilizing or at least falling more slowly,” said RBC. “We see room for further gradual progress ahead as improved affordability and brightening job prospects shore up confidence, increasingly unlocking pent-up demand and slowly draining piled up inventory.”
“But, the path is unlikely to be smooth or uniform across the country. The prolonged market correction in Ontario and British Columbia has left a deep mark on sentiment that will take time to heal. And, more resilient regions have little upside left amid stable or rising interest rates and stagnant population growth.”
Either way, we’re already too far gone to prevent a national-level decline in 2026, with RBC projecting home sales to fall 3.6% to 453,200 and the benchmark price index to fall 2.3% to $794,200, which they mostly attributed to the weak start of the year.
The long-awaited recovery is now expected to become more visible in 2027, when RBC is projecting home sales to increase by 6.7% to 483,600 and the benchmark price index to increase by 0.8% to $800,700.
“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 smidgeon above the cyclical low,” said RBC.
One reason to have some optimism, RBC says, is that the prolonged market downturn has undoubtedly generated pent-up demand that is waiting to be unlocked. RBC estimates that as many as 400,000 household formations may have been suppressed since 2019.
If the market starts turning around, the momentum could also build upon itself.
“As increased transactions absorb units from inventory, a greater sense of urgency is likely to emerge,” said RBC. “It may not pay off to play the waiting game as suitable options get snapped up faster. Such signals to enter the market will be self-reinforcing. The more buyers respond, the stronger the signals, and ultimately, the recovery becomes.”
RBC says it also believes that interest rates have hit rock bottom; as in, they will not get any lower. RBC is forecasting that the Bank of Canada will continue to hold its policy interest rate — currently at 2.25% — until the end of the year before raising it in 2027 as the economy picks up.
Regional Divergence
There will, of course, be differences between regions, with regions that have seen precipitous drops — British Columbia and Ontario — expected to see bigger changes next year, and regions that have been relatively stable — the Prairies and Atlantic Canada — seeing moderate changes.
Home sales are forecasted to decrease by 4.6% in BC in 2026, and increase by 7.8% in 2027. Ontario is forecasted to decrease by 0.5% in 2026 and increase by 8.2% in 2027.
On the other end of the spectrum, Manitoba is expected to decrease by 4.2% in 2026 — at a much lower volume — and increase by 3.8% in 2027, while Quebec is expected to decrease by 4.5% in 2026 and increase by 4.0% in 2027.
“We expect Ontario and BC to slowly emerge from their prolonged slumps with material affordability improvement — albeit from worst-ever levels — helping to unlock some pent-up demand,” said RBC. “Measured sales rebounds next year in Saskatchewan, Manitoba, Quebec and parts of Atlantic Canada will reflect steadier ownership costs, comparatively less pent-up demand to unlock and slower population growth.”
These projections, however, are more so for single-family homes and townhouses, and less so for the condo market, which is expected to take longer to turn around due to excess inventory in major markets (Vancouver and Toronto) and investor apathy.
“The recovery ahead isn’t a sure bet given the many risks still facing the Canadian economy,” said RBC. “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. Escalation in the trade war with the US or conflict in the Middle East could further undermine confidence.”
“At home, immigration cuts or affordability issues could prove stiffer headwinds than we expect. These risks threaten to perpetuate the on-again-off-again pattern in the housing market. Even in the best of cases, we think the recovery will be irregular with two steps forward followed by a step back, and regions progressing and regressing at the same time.”
