OTTAWA — Canada's housing market is showing signs of improved affordability in early 2026, particularly in the country's largest and most expensive cities, according to a new report from RBC Economics. The analysis, released at the end of March, highlights a quarter-over-quarter improvement in most major markets, driven by softening prices in areas that have been slumping for years.
The report examines housing affordability across key Canadian cities by measuring ownership costs as a percentage of median household income. In the first quarter of 2026, from January to March, more than 57 percent of markets saw affordability improve compared to the final three months of 2025. This marks a shift from the previous quarter, when less than half of the markets experienced gains in affordability.
However, the improvements fall short of the robust progress seen earlier in the year. In the third quarter of 2025, from July to September, more than nine out of 10 markets reported better affordability conditions. Nationally, ownership costs dropped to 52 percent of household income by the end of 2025, an improvement from the peak of 63 percent recorded in 2023.
RBC Economics forecasts further modest gains, with the affordability measure expected to dip to about 51 percent sometime in 2026 before edging up slightly by year's end. "Affordability had improved in most Canadian cities in the first three months of 2026," the report states, emphasizing the role of declining prices in high-cost regions.
Canada's biggest urban centers, which have long grappled with sky-high home prices, continue to lag behind the national average but are seeing the most notable relief. In Toronto, ownership costs stood at nearly 63 percent of household income at the close of 2025, reflecting ongoing pressures in the Greater Toronto Area. Vancouver, often cited as one of the world's least affordable housing markets, fared even worse, with costs exceeding 88 percent of income.
These figures underscore the persistent challenges in British Columbia's largest city, where median home prices have historically outpaced wage growth. Real estate experts have attributed Vancouver's struggles to factors like limited land supply, foreign investment, and zoning restrictions that limit new construction.
In contrast, some Prairie cities are bucking the trend with stronger affordability. Calgary's ownership costs accounted for about 42 percent of household income in late 2025, a modest increase from prior periods but still within historical norms. The report notes that while Calgary experienced a slight uptick in costs, it remains more accessible than eastern counterparts.
Edmonton emerged as the most affordable among major Canadian cities, with ownership costs at roughly 33 percent of income — slightly above its long-term average but a bargain compared to coastal metros. This positioning has drawn interest from buyers relocating from pricier provinces, contributing to steady demand in Alberta's capital.
The broader context of Canada's housing crisis dates back several years, exacerbated by low interest rates in the early 2020s that fueled bidding wars and rapid price escalations. The Bank of Canada's aggressive rate hikes starting in 2022 aimed to curb inflation but also cooled the market, leading to price corrections in overheated areas like Toronto and Vancouver.
Robert Hogue, assistant chief economist at RBC, has previously commented on these dynamics, noting in related analyses that "the affordability measure is much better than 2023 when housing affordability as a percentage of household income peaked at 63 per cent." While the latest report doesn't include new quotes from Hogue, it builds on RBC's ongoing monitoring of mortgage rates, income growth, and inventory levels.
Stakeholders in the real estate sector have mixed reactions to the data. The Canadian Real Estate Association (CREA) reported in its own March update that national average home prices fell 4.5 percent year-over-year in February 2026, aligning with RBC's observations of slumping markets. CREA President Cliff Iverson stated, "While affordability is improving in some areas, first-time buyers still face significant barriers in major cities."
On the policy front, federal and provincial governments have introduced measures to address affordability, including expanded first-time buyer incentives and efforts to boost housing supply. In Alberta, where Calgary and Edmonton shine in affordability rankings, provincial officials have touted streamlined permitting processes as a key factor in maintaining accessible markets.
Yet, not all experts agree on the trajectory. Some economists warn that if interest rates remain elevated, any affordability gains could be temporary. The RBC report itself cautions that while 2026 may see slight improvements, underlying supply shortages could reverse progress by late in the year.
Looking ahead, the report's projections suggest a cautious optimism for homebuyers in slumping markets. With inventory levels rising and buyer sentiment stabilizing, cities like Toronto and Vancouver may continue to see relief. For now, though, the national picture remains uneven, with western provinces offering a brighter spot amid ongoing national debates over housing policy.
As Canada navigates economic uncertainties, including potential trade tensions and labor market shifts, housing affordability will remain a critical issue. RBC's analysis provides a snapshot of progress, but sustained improvements will likely depend on coordinated efforts to increase supply and support income growth across the board.