In winter and spring, home sales have once again attracted attention. July was the fourth consecutive increase, with national activity up 3.8% from June, up from the March low. The large Toronto region has been a key driver, with trading soaring 35.5% in that deal.
Despite these signs of these momentum, the economics of RBC warns that the recovery will be unbalanced. Its latest project for national resale will fall 3.5% this year before rebounding in 2026, while prices are expected to fall next year in high stocks in Ontario and British Columbia.
“It is encouraging that there are signs of a sustained recovery recently,” said Robert Hogue, assistant chief economist at Royal Bank of Canada (RBC). “Potential buyers are re-entering the market as the economy fears and the harvest of lower interest rates. We expect this gradual recovery to continue in the second half of 2025, increasing demand in 2026.”
The prospects for 2026 are brighter
Royal Bank of Canada (RBC) believes that resales will be 7.9% next year to 504,100 units, far exceeding the decline this year, but still failing to meet pre-pandemic norms. Forecasts call for improved working conditions and lower borrowing costs to help more buyers bring more buyers back, although burdensome pressure will limit the extent to which demand runs.
Unemployment is expected to peak at 7.1% later this year before eased in 2026, giving families more confidence to make long-term commitments such as home purchases.
Prices under major market pressure
National prices are expected to rise by 0.7% this year, but RBC said the gains were pre-loaded. It expects to drop by 0.7% in 2026 as Ontario and BC continue to face the highest supply levels in a decade and strong competition from sellers.
“Up until then, strong competition between sellers could keep prices under pressure and continue until early 2026 until stable,” Hogg noted.
By contrast, the market in Quebec, parts of the Atlantic Atlantic Ocean in Canada are expected to increase price increases over the next two years.
Structural challenges continue
While lower interest rates have brought the cost of ownership to the most affordable level in three years, RBC says affordability is still much higher than the pre-pandemic levels of the country’s most expensive markets.
Hogue added that since mid-2024, Canadian banks have lowered tax rates and are “not fully played”, while the trade war last fall shortened recycling rates. He expects momentum to recover as borrowing cost filters are filtered, but no further stimulus is expected, with Royal Bank of Canada (RBC) forecasts requiring policy rates to last 2.75% in 2026 and as the market gets higher and higher in the long term, as the market shrinks expectations of additional easing.
Demographic shifts are also expected to be weighed on demand, while immigration targets reduce family formation and make investor activity in major urban centers addictive.
According to RBC, softness reflects corrections to the pandemic boom. Rock minimum rate, income support and transfer housing demand moves demand forward and gradually restores the market to balance.
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Last modified: August 21, 2025
