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.