Canada’s housing market is showing signs of a gradual recovery in the second half of 2025, but Ontario home prices are expected to remain under pressure until at least early 2026, according to a new RBC Economics report.
The report highlights a significant shift in supply-demand conditions in Ontario, with more homes for sale than at any point since June 2010. This surge in inventory has tipped the market in buyers’ favour, creating increased competition among sellers and leading to steeper price declines compared to other provinces. RBC predicts the market will stabilize in early 2026.
Ontario and B.C. Facing Market Imbalances
While much of the country will see varied market conditions, Ontario and British Columbia are facing specific challenges. RBC points to “imbalances in condo markets in Toronto and Vancouver” that are spilling over into other property types.
In contrast, balanced markets in the Prairies, Quebec, and parts of Atlantic Canada are expected to experience modest price gains through 2025 and 2026.
Condo Market Declines in Toronto
Data from the Toronto Regional Real Estate Board (TRREB) shows the average selling price for a condo in the Greater Toronto Area dropped 5.9% in Q2 2025 to $685,961.
A separate report from Urbanation revealed that new condo sales in the GTA fell 69% last quarter, with only 502 units sold.
RBC also noted that the federal government’s immigration slowdown will primarily affect rental demand. Since newcomers typically rent for five to ten years after arrival, a slowdown in immigration could further reduce rental demand. Recent data from Rentals.ca shows one-bedroom and two-bedroom rental prices have already fallen 6.4% and 8.8% year-over-year.
Lower Interest Rates Unlocking Demand
RBC says lower interest rates have made homeownership the most affordable in three years. However, Ontario’s high home prices mean affordability remains a major hurdle for buyers.
TRREB reported that July 2025 saw the highest number of home sales for that month since 2021. The average selling price across all property types fell 5.5% year-over-year to $1,051,719, but softer prices combined with reduced borrowing costs are drawing more buyers into the market.
“Improved affordability, brought about by lower home prices and borrowing costs, is starting to translate into increased home sales,” said TRREB President Elechia Barry-Sproule. “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.”
RBC’s Price and Rate Forecast
RBC predicts the Bank of Canada will maintain its key lending rate at 2.75% through 2026, encouraging more buyers to act. However, the share of household income needed to cover ownership costs remains well above pre-pandemic levels, keeping affordability strained in Ontario.
The report forecasts:
- Ontario home prices to decline 1% in 2025 and 1.4% in 2026.
- National home prices to rise 0.7% in the remainder of 2025.
RBC concluded that with unsold inventory at decade highs, buyers have more options and feel less urgency to make offers, which will keep Ontario prices under pressure in the near term.
Source: CTV news
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