Canadian housing affordability has shown signs of improvement in 2025, but the reality for prospective buyers remains challenging. Despite seven consecutive quarters of easing homeownership costs, the share of income required to carry a home is still near the historic highs seen during the 1990s housing bubble — a sobering reminder of how far affordability has eroded over the past decade. This evolving landscape continues to impact real estate decision-making across major cities like Toronto and Vancouver, where buying a home still demands a substantial portion of household income.
Housing Affordability Trends Across Canada
According to the latest RBC Housing Affordability Index, ownership costs as a percentage of median household disposable income improved to 53.2% in the third quarter of 2025. This marks the seventh straight quarterly improvement, but the pace of that improvement is slowing, with the most recent quarterly change only marginal compared to earlier gains. The index tracks mortgage payments, property taxes, and utilities against income — with a lower share indicating better affordability.
While this trend might seem positive on paper, it masks the broader challenge: affordability still hovers close to the level reached during the peak of the 1990s real estate cycle — widely considered one of the worst in modern Canadian history. Housing remains well out of reach for many Canadians, especially first-time buyers and middle-income households.
Major Metro Markets: Still Tough for Buyers
Significant affordability improvements are concentrated in larger urban centres where prices have softened and mortgage rates have eased. Markets such as Toronto, Vancouver, and Victoria are notable examples. Though these cities experienced some of the largest quarterly gains in the affordability index, each still requires households to commit more than 65% of their income to homeownership costs — far above long-term norms.
Meanwhile, certain smaller markets are getting closer to long-run historical norms. Cities like Regina and Saskatoon have affordability measures near average, reflecting healthier local incomes relative to home prices. These conditions highlight the regional nature of Canada’s housing crisis: while coast-to-coast trends show improvement, the magnitude of unaffordability varies significantly from one city to another.
What’s Driving the Modest Improvement?
Experts argue that the recent affordability gains are largely linked to lower mortgage interest rates, flattening home prices in several markets, and modest income growth. After aggressive rate hikes in the past, the Bank of Canada paused increases, giving buyers some breathing room. But RBC notes that the cumulative impact of earlier high rates still weighs heavily on affordability and that further meaningful gains may be limited unless home prices fall more steeply or incomes rise substantially.
The slowing pace of improvement suggests the market may be approaching a plateau where incremental progress is harder to achieve. This dynamic is particularly evident in major centres where structural supply constraints and sustained demand continue to exert upward pressure on prices.
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How Affordability Affects Canadian Buyers
For many Canadians, these numbers translate into real-world consequences:
- First-time buyers face steeper hurdles as down payment requirements remain high relative to typical incomes.
- Households in expensive markets like Vancouver and Toronto must allocate an oversized share of their earnings toward mortgage costs.
- Migration patterns are shifting as younger buyers and families look to smaller or more affordable regions to find housing options that align with their budgets.
These affordability challenges have tangible impacts on where and how Canadians choose to live — from delaying homeownership to selecting rental options in more affordable cities, and influencing decisions about career moves and long-term financial planning.
What’s Next for the Canadian Housing Market?
Looking ahead, experts at RBC suggest that while some local markets might witness continued incremental gains, a structural return to pre-pandemic affordability levels is unlikely without significant policy changes, increased housing supply, or broad income growth. The Bank of Canada’s hold on interest rates into 2026 may reduce one source of owner cost pressure, but that alone won’t close the gap created by years of strong price growth.
Policy solutions such as faster home-building, incentives for first-time buyers, and strategic urban planning could help shift accessibility over the long term. In the short term, buyers and investors will continue navigating a market where affordability remains a defining — and often limiting — factor.
