After more than a year of steady progress, Canada’s housing affordability may be approaching a turning point.
According to RBC’s latest Housing Trends and Affordability Report for Q2 2025, homeownership costs have declined for the sixth consecutive quarter, with the national aggregate affordability measure improving to 53.6%. This marks a notable shift from the peak affordability pressures seen during the pandemic-era housing boom.
Affordability Gains Seen Across Most Markets
Ownership costs eased in nearly all major housing markets, with the exception of Regina, which saw a modest increase. Vancouver, Toronto, and Victoria recorded the largest improvements—an encouraging sign in markets that have long been among the least affordable in Canada.
The Prairie provinces now sit much closer to historical affordability norms, with cities like Calgary and Edmonton offering relatively more accessible paths to homeownership. Still, affordability remains well above pre-pandemic levels in most parts of the country.
Toronto Area: Ownership Costs Still a Barrier Despite Easing
In the Toronto area, affordability remains a significant barrier—even as costs have started to ease.
Buyer demand has picked up modestly since the summer, in part due to reduced trade and economic uncertainty. However, transaction volumes remain historically subdued. Poor affordability and weakening job prospects continue to weigh heavily on both sides of the market, creating hesitation among buyers and uncertainty for sellers.
Over the past year, ownership costs have declined notably—particularly for condominiums. Still, the improvements haven’t been sufficient to unlock the significant pent-up demand. RBC’s aggregate affordability measure for the Toronto area stands at 66.4%, signaling extremely high ownership costs relative to household income. Even as home prices continue to soften, this affordability ceiling is expected to persist and constrain broader market activity.
Why the Affordability Trend May Be Slowing
The recent improvements in affordability have largely been driven by falling mortgage rates and earlier interest rate cuts by the Bank of Canada. However, that momentum may be running out.
Two key headwinds are emerging:
Interest Rate Tailwinds Fading: Much of the affordability relief was tied to previous rate cuts. As those effects diminish and borrowing costs stabilize, further progress on this front may slow.
Labour Market Strain: Slowing wage growth and softening employment conditions could limit income gains, reducing households’ ability to afford ownership despite lower prices.
Outlook
While the trend of easing ownership costs is encouraging, the path forward is more complex. With affordability still deeply stretched in many major cities—particularly Toronto and Vancouver—even declining home prices may not be enough to significantly boost market participation.
At the same time, the relatively healthier affordability conditions in the Prairies could create opportunities for buyers willing to explore markets outside the traditional hotspots.
Final Thoughts
Canada’s housing affordability has taken a step in the right direction—but it’s far from fixed. Structural challenges remain, particularly in high-demand urban centres where price levels and borrowing costs continue to outpace income growth. As interest rate relief slows and economic uncertainty grows, meaningful progress on affordability will depend not only on market trends, but also on supply-side solutions, labour market stability, and policy support.
Source:
RBC Economics – Housing Trends and Affordability Report, Q2 2025