Owning a home in Canada is becoming more affordable, according to a new report from Robert Hogue, assistant chief economist at RBC Economics. “It’s the most affordable it’s been in three years,” says Hogue, referring to the amount of household income required to cover housing costs. “Interest rate cuts continue to drive homeownership costs lower. A slight easing in home prices and sustained household income gains also contributed to lowering RBC’s aggregate affordability measure for Canada to 55.1% of income in Q1 2025 from 60.7% of income a year earlier." Home prices sky-rocketed during the pandemic-induced buying frenzy and are only just now coming back to earth, says Hogue. “Prices are still a long way from more attainable pre-pandemic levels. Steady improvements in the past five quarters have reversed only roughly a third of the loss of affordability nationwide,” he says, adding, “Buying conditions remain extremely challenging in many major markets.” In Vancouver and Toronto, ownership costs decreased the most in Q1 2025, but, because the costs rose higher and faster than other markets, they remain Canada’s least affordable markets, although Quebec City, Montreal and Victoria saw costs rise. .“Generally improving trends are likely to be sustained,” says Hogue. “We see earlier interest rate cuts continuing to favourably impact affordability with price declines in some markets further aiding the process.” “Whether this will spur potential buyers into action will depend on whether de-escalation of the trade war continues to boost confidence.” Condo buyers have seen the most significant affordability increase, says Hogue. “In some parts of the country, including Edmonton, Saskatoon, Regina, Winnipeg and even Toronto, the condo affordability measure is now effectively back to where it was before the pandemic,” he says. “Little resetting was needed in most cases as condo affordability had not deteriorated much during the pandemic.” Singling out the Toronto market, Hogue says the city’s “condo measure returning so close to its pre-pandemic level is noteworthy, because it spiked from 2021 to 2023. Moderate price declines have significantly amplified the generally positive effect of lower interest rates.” Price drops were also instrumental in improved condo affordability in Vancouver and Victoria, Canada’s two other priciest markets, “though both still have a lot more lost ground to recover,” says Hogue. “Continued growth or smaller dips in prices has somewhat stalled the easing process in Calgary, Ottawa, Montreal and other markets.” .“The same applies to all single-detached homes segments we cover across the country. Despite material improvement, affordability remains worse than it was before the pandemic, substantially so in Vancouver and Victoria.” On an aggregate basis, Hogue argues interest rate cuts, further price drops in some markets and sustained income growth are set to reverse approximately half the rise in RBC’s composite affordability measure for Canada during the pandemic by year end, up from about one-third most recently. “Any further progress gets trickier once interest rates stabilize, because than it rests entirely on the evolution of home prices and household income, the denominator in RBC’s affordability measures, he says. “Price drops or strong income gains would be required to further drive significant improvement. However, we expect generally stable prices in Canada over the next two years, with some local exceptions, and modest wages growth amid persistent labour market slack.” Hogue says the imposition of US tariffs and resulting trade war took all the steam out of a housing market recovery in Canada due to concerns about the potential economic fallout prompting many buyers to retreat to the sidelines. Recent de-escalation of tariffs, however, could be alleviating some fears. .“Early signs emerged in May that point to resale activity possibly turning a corner, yet prices remained under downward pressure in Ontario and British Columbia,” he says. “Rebuilding confidence is clearly positive for the housing market, but it is unlikely to trigger a broad-based rally. Housing affordability issues are poised to be top of mind again in many parts of the country, and a major obstacle hindering recovery.”
