Canada’s housing market has enjoyed a rare streak of improving affordability, but the pace of relief is poised to slow as economic headwinds gather.
RBC Economics reported that its national aggregate affordability measure fell to 53.6% in Q2 2025, down from a record 63.5% at the end of 2023, marking six consecutive quarters of improvement.
“Lower interest rates, flat prices and sustained household income gains contributed to lowering RBC’s aggregate affordability measure for Canada,” Robert Hogue, assistant chief economist at RBC, said.
Ownership costs dropped in nearly every market, with Vancouver, Toronto and Victoria seeing the largest decreases. Yet, these cities remain the country’s least affordable. Regina stood out as the only major market where costs rose slightly.
“Affordability measures are back to historical norms in the Prairies. However, they’re still a long way from more attainable pre-pandemic levels in the rest of the country with some exceptions,” Hogue said.
However, the tailwinds that have driven these gains are fading. “The speed of improvement is likely to slow. We expect further easing in ownership costs, but see the effect of earlier interest rate cuts fading. Decelerating income growth will also dampen buyers’ purchasing power,” Hogue said.
RBC’s analysis points to a cooling labour market and rising unemployment, particularly in Ontario, as key risks. “The ongoing trade war is taking a toll on the province’s manufacturing sector with ripple effects spreading through related industries and supporting services,” Hogue said.
Regional disparities persist as affordability stabilizes
In Vancouver, the affordability measure remains at a punishing 89.2%, the highest in the country. “Property transactions remain suppressed despite modest summer gains, underscoring persistent affordability burdens,” Hogue said.
Calgary and Edmonton, by contrast, have seen affordability measures edge closer to long-term averages, buoyed by robust construction and steady demand.
Market confidence grows, but barriers remain high
The easing of trade tensions since spring has helped restore some confidence, with home resales rebounding in several markets. However, this has not been enough to trigger a broad-based recovery.
“Growing confidence represents a constructive development for housing markets, but it’s insufficient to spark a widespread activity rebound,” Hogue said.
In Toronto, despite a rebound in buyer demand, “ownership cost pressures have eased noticeably in the past year, particularly for condominiums, but the progress is not enough to fully unlock pent-up demand.”
Broader implications for buyers and lenders
Looking ahead, RBC expects that further affordability gains will be harder to achieve. Borrowers coming up for renewal may face higher payments than they anticipated, particularly if income growth stalls. This could drive more conversations around refinancing, debt consolidation, or switching lenders for better terms.
“Further advancement becomes more challenging once interest rates reach a stable plateau as it depends exclusively on home price movements and household income trends,” Hogue said.
With wage growth decelerating and borrowing costs still elevated compared to pre-pandemic levels, mortgage professionals may see a shift in their client base.
More activity could come from move-up buyers or investors in regions where affordability is closer to historical norms, such as the Prairies and Atlantic Canada. There may also be increased demand for alternative lending solutions, longer amortization periods, or variable-rate products as clients look for ways to manage higher monthly payments.
Lenders and brokers will need to pay close attention to regional disparities. While affordability is stabilizing in the Prairies and Atlantic Canada, persistent challenges in Ontario and British Columbia could increase credit risk and delinquency concerns.
CMP
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