RBC: Housing recovery is coming, but don’t expect a boom

Canada’s housing market is beginning to move toward recovery, but RBC Economics says the turnaround has come too late to prevent home sales and prices from declining this year.

In its mid-year housing outlook released this week, RBC said home resales have been improving since April, inventory has levelled off and prices are either stabilizing or declining at a slower pace.

The bank expects the recovery to gain traction as affordability improves in some markets, employment prospects brighten and buyers who have spent years on the sidelines begin to return.

Still, RBC assistant chief economist Robert Hogue cautioned that the recovery is unlikely to be quick or consistent across the country.

“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,” Hogue wrote.

Sales, prices expected to fall in 2026

RBC forecasts home resales will fall 3.6 per cent to 453,200 units in 2026, while its benchmark price index is expected to decline 2.3 per cent to $794,200.

The picture is expected to improve in 2027, when RBC forecasts sales will rise 6.7 per cent to 483,600 units and the benchmark value will increase 0.8 per cent to $800,700.

Even then, RBC expects sales to remain well below pre-pandemic levels and home values only slightly above their cyclical low.

‘Hundreds of thousands’ on the sidelines?

A major factor in RBC’s outlook is the number of Canadians who delayed buying as ownership costs climbed.

“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,” Hogue wrote.

That includes renters who have remained in rental housing longer than preferred and homeowners who postponed plans to upsize or downsize.

RBC estimates more than 400,000 Canadian households may not have been formed since 2019. The bank believes unlocking some of that delayed demand could provide significant support to the housing market.

Prospective buyers may also be in a stronger position to act, with Canadians saving at a rate near a 25-year high and employment among people aged 25 to 34 above its historical average.

RBC expects this pent-up demand to outweigh weaker homebuying demand stemming from slower population growth and immigration cuts.

Interest rates have likely bottomed

Improved affordability in some of Canada’s most expensive markets should also bring more buyers back, RBC said. Ownership costs remain high, however, and are a key reason the bank does not expect a sharp rebound.

Further relief from interest rates is also unlikely.

“We believe they are as low as they will get this cycle,” Hogue wrote.

RBC expects long-term rates to rise modestly through the end of 2027 and the Bank of Canada to hold its policy rate through the end of 2026 before beginning to raise rates next year.

Improving economy could rebuild confidence

Better economic conditions could provide another boost.

Low confidence has weighed on prospective buyers amid falling home values, affordability challenges, a soft economy and concerns about employment. RBC expects economic growth to continue through the end of 2027 and labour market slack to disappear by next spring.

Stabilizing home prices could also encourage buyers who have been reluctant to purchase while values were falling. As transactions increase and inventory is absorbed, RBC expects buyers could begin to feel more urgency to enter the market.

RBC cautioned, however, that its forecast faces several risks, including further trade tensions with the United States, geopolitical conflict, deeper effects from immigration cuts and persistent affordability challenges.

The housing market has already experienced what RBC described as four “false starts” since 2023, when periods of improvement were interrupted by outside economic events.

Ontario and B.C. expected to emerge from slumps

Ontario and British Columbia are expected to see some of the strongest sales growth next year as improved affordability helps bring sidelined buyers back.

RBC forecasts Ontario home sales will rise 8.2 per cent in 2027 after declining 0.5 per cent this year. B.C. sales are expected to climb 7.8 per cent following a 4.6 per cent decline in 2026.

Home values are forecast to increase 0.7 per cent in Ontario and 0.5 per cent in B.C. next year.

The condo market could take longer to recover. RBC said high inventory in the Toronto and Vancouver areas, combined with weak investor demand, could keep condo prices falling into 2027.

Price growth to cool in resilient markets

Markets that have held up better through the downturn are expected to lose some momentum as population growth slows and inventory increases.

Price growth is forecast to slow in 2027 to 2.5 per cent in Saskatchewan, 1.9 per cent in Manitoba, 1.2 per cent in Quebec, 0.9 per cent in New Brunswick and 1.3 per cent in Newfoundland and Labrador.

Nova Scotia and Prince Edward Island are expected to see prices increase 1.1 per cent and 0.3 per cent, respectively, after declines this year.

Alberta is expected to remain relatively strong, with RBC forecasting sales growth of 7.1 per cent and a 1.8 per cent increase in home values in 2027.

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