As real estate market across Canada sees ‘gradual recovery’ prices in Ontario will remain ‘under pressure:’ report

Canada’s housing market is likely to continue a “gradual recovery” in the second half of the year but a glut of listings in Ontario and British Columbia will likely “keep prices under pressure” in those markets until 2026, a new report from RBC suggests.

RBC’s report says that “supply-demand conditions have shifted in buyers’ favour,” in Ontario. The province has more homes for sale than it has since June 2010. The report suggests that Ontario’s large inventory and competition among sellers will cause prices to drop at steeper rates than other provinces before the market begins to “stabilize” in early 2026.

In contrast, Ontario and B.C. will continue to face challenges with “imbalances in condo markets in Toronto and Vancouver likely spilling into other segments.“

“Prices will vary significantly across the country. Balanced supply-demand conditions in the Prairies, Quebec, and parts of Atlantic Canada are expected to support modest price gains in 2025 and 2026,” the report states.

Condo conundrum continues

The average selling price for a condominium in the GTA fell by 5.9 per cent in the second quarter to $685,961, data from the Toronto Regional Real Estate Board shows.

A separate report from Urbanation, a real estate analysis firm, also showed that new condo sales were down 69 per cent last quarter after just 502 units changed hands.

RBC highlighted the federal government’s immigration cooldown saying it will “primarily affect rental demand.” Immigrants generally rent for five to 10 years after entering Canada, the bank says, and without them rental demand will slump. Rental prices are already dropping according to a report from Rentals.ca, with one and two-bedroom rentals down 6.4 and 8.8 per cent from last year.

Lower interest rates ‘unlock pent-up demand’

RBC says that lower interest rates “have made homeownership the most affordable it’s been in three years.” But in Ontario, with its high prices, affordability continues to be a challenge, the bank says.

The Toronto Real Estate Board reported the highest number of home sales for the month of July since 2021 last week. The average selling price across all property types decreased 5.5 per cent year-over-year to $1,051,719. Prices, however, remain soft.

“Improved affordability, brought about by lower home prices and borrowing costs, is starting to translate into increased home sales. More relief is required, particularly where borrowing costs are concerned, but it’s clear that a growing number of households are finding affordable options for homeownership,” said Toronto Regional Real Estate Board (TRREB) President Elechia Barry-Sproule.

RBC is predicting that the Bank of Canada will keep its key lending rate at 2.75 per cent through 2026 which the report says is “encouraging more buyers to act.” However, since the portion of household income needed to pay ownership costs remains “well above pre-pandemic levels,” affordability will continue to be a challenge for Ontario.

RBC said that unsold housing inventory has reached decade highs and that “buyers now have more options and feel less urgency to act.” RBC is predicting Ontario home prices to decrease by one percent in 2025 and 1.4 per cent in 2026. It is anticipating a marginal increase in home prices nationally over the remainder of 2025 of 0.7 per cent.