Home resales in Canada will drop 3.5% by next year, forecast says

Canadians will likely continue to remain reluctant to jump into the housing market for the rest of the year, with home resales forecast to keep falling, new analysis from the Royal Bank of Canada said Tuesday.

The trade war with U.S. President Donald Trump has pushed demand in Canada’s housing market down, with both sales and home prices falling across the country.

The home resale data specifically measures how many existing homes are being resold to new owners, rather than looking at data that includes the sale of newly built homes.

Around 467,100 old homes are expected to be resold in Canada this year, a drop of 3.5 per cent compared to last year, the RBC report said. The bulk of the pullback — a drop of 4.1 per cent — has already taken place in the first six months of the year, it added.

Ontario and British Columbia will take the brunt of the hit from a cold housing market, it said.

However, the signs of a recovery are already on the walls with prospective buyers shedding their economic fears and interest rates falling.

“We expect this gradual recovery to continue in the second half of 2025, setting the stage for stronger demand in 2026,” the report added.

While the resale market is likely to see a 7.9 per cent rebound in 2026 with 504,100 homes resold, it would still be below the pre-pandemic five-year average of 511,000 homes resold in a year.

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“Several constraints will temper the recovery. A fragile labour market, reduced immigration targets, and affordability challenges will limit the pace of growth,” the report said, adding that the balance will continue to shift in favour of buyers in both Ontario and B.C.

While there is expected to be an overall modest increase of 0.7 per cent in home prices, it is largely due to gains in home prices early in the year. Prices will continue to fall in the second half of the year and well into 2026, the report said.

In 2026, home prices in Canada are expected to decline by 0.7 per cent, erasing the modest gains they will likely make this year.

However, this is largely due to Ontario and B.C. The two provinces will see the steepest drop in home prices, the report said, largely due to high inventory and strong competition among sellers.

The Prairies, Quebec and parts of Atlantic Canada are expected to see modest price growth in 2025 and 2026