RBC Predicts Gradual Recovery for Canadian Real Estate Market by 2027

📅 2 weeks ago

RBC forecasts a gradual recovery in the Canadian real estate market by 2027, despite a persistent downturn and regional disparities. Home sales are expected to decline in 2026 before rebounding, with various factors influencing market dynamics across provinces.

As we approach the latter half of the year, the Canadian real estate market continues to show signs of weakness, with a full recovery not anticipated until 2027, according to a recent report from RBC. The report indicates that home resales have been improving since April, with inventory stabilizing and prices either stabilizing or decreasing at a slower pace. RBC noted, "We see room for further gradual progress ahead as improved affordability and brightening job prospects shore up confidence, increasingly unlocking pent-up demand and slowly draining piled up inventory."
However, the report cautions that the recovery path will not be uniform across Canada. A prolonged market correction in Ontario and British Columbia has deeply impacted sentiment and will require time to heal. In contrast, regions that have shown more resilience are facing limited upside due to stable or rising interest rates and stagnant population growth. RBC anticipates a national decline in home sales by 3.6% to 453,200 in 2026, with the benchmark price index expected to drop by 2.3% to $794,200. This decline is largely attributed to a weak start to the year.
Looking ahead, RBC projects a more visible recovery in 2027, forecasting a 6.7% increase in home sales to 483,600 and a slight rise in the benchmark price index to $800,700. Despite this optimism, RBC emphasizes that the overall tone of Canada’s market is likely to remain soft, with projections for resales significantly below pre-pandemic levels and home values just slightly above cyclical lows.
One potential silver lining mentioned by RBC is the pent-up demand that has built up during the prolonged downturn. The report estimates that as many as 400,000 household formations may have been suppressed since 2019. If market conditions begin to improve, this demand could be unleashed. RBC states, “As increased transactions absorb units from inventory, a greater sense of urgency is likely to emerge.” This could lead to a self-reinforcing cycle where increased buyer activity prompts more buyers to enter the market.
RBC also posits that interest rates have reached their lowest point, with the policy interest rate currently at 2.25%. The bank expects that the Bank of Canada will maintain this rate through the end of the year before considering increases in 2027 as economic conditions improve.
Regional differences in market performance are anticipated, particularly in British Columbia and Ontario, which have experienced significant declines. Home sales in British Columbia are expected to drop by 4.6% in 2026, with a rebound of 7.8% in 2027. Ontario's sales are projected to decrease by 0.5% in 2026, followed by an increase of 8.2% in 2027. Conversely, Manitoba is expected to see a decrease of 4.2% in 2026, with a modest increase of 3.8% in 2027, while Quebec is projected to decline by 4.5% in 2026 but recover by 4.0% in 2027.
RBC emphasizes that the recovery will be more pronounced for single-family homes and townhouses, with the condo market lagging due to excess inventory in major urban centers like Vancouver and Toronto, along with a lack of investor interest. The report concludes with a note of caution, stating, “The recovery ahead isn’t a sure bet given the many risks still facing the Canadian economy.” RBC highlights that there have been four false starts since 2023, with factors such as trade wars and energy price spikes disrupting potential improvements.
Furthermore, domestic challenges like immigration cuts and ongoing affordability issues could pose significant obstacles to recovery, potentially perpetuating the cyclical nature of the housing market. RBC predicts that even in favorable scenarios, the recovery will be uneven, with simultaneous progress and regression across different regions.

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