Canada’s real estate market is showing signs of recovery, but with significant uncertainty ahead, according to a recent report by RBC Economics. While the market has seen increased demand in recent months, largely driven by falling mortgage interest rates, challenges still loom—especially due to potential economic disruptions from a possible trade war with the United States.
The report highlights a key risk: U.S. tariffs on Canadian exports, which could hinder a sustained recovery in Canada’s housing market. Such a scenario might lead to economic instability and job losses, potentially dampening demand for homes.
Despite these concerns, RBC Economics points to favorable trends in the real estate market. The inventory of homes for sale has increased since 2021, though it remains below long-term averages. Ownership costs, while still high relative to historical norms, have been on a downward trajectory. Currently, the proportion of household income spent on homeownership costs is about 52%, down from an alarming 64% in 2023, but still significantly higher than the levels seen in the 2000s and 2010s.
Affordability remains a pressing issue, with many Canadians continuing to struggle with high ownership costs. However, RBC forecasts that home sales in the near future will likely return to historical averages, assuming mortgage rates continue to decrease. Property values are expected to increase modestly over the next few years, with growth projected to be between four and five percent annually in Alberta. In contrast, markets in British Columbia and Ontario are expected to see flat sales and prices.
Another variable influencing the market is Canada’s reduced immigration levels. While fewer immigrants could ease demand and help moderate prices, it could also lead to lower confidence among sellers, further contributing to the market’s instability.
In summary, while the Canadian housing market is showing signs of recovery, external factors such as potential trade tensions with the U.S. and ongoing affordability concerns could shape its trajectory. RBC’s forecast suggests a slow but steady rebound, with property values inching upward through 2027, barring significant economic shocks.
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