Alert: Montreal and Quebec City Affordability Hits 30-Year Worst — How to Resolve the Inventory Crisis?
Canada's national RBC housing affordability measure fell to 52.4% in Q4 2025, the eighth consecutive quarterly improvement, down from the all-time high of 63% at the end of 2023. However, the latest RBC report (released March 31, 2026) clearly states that gains have become "weaker and sparser", with quarterly declines moderating to an average of just -0.4 percentage points over the past two quarters, well below the -1.6 percentage point average over the previous year and a half. Core counter-narrative: The national data masks the reality of Quebec's markets. RBC's original text points directly to Montreal and Quebec City — at their worst levels in more than three decades.
Montreal's RBC measure rose to 50.4% (+1.1pp YoY, +1.3pp in Q4 alone), while Quebec City reached 35.9%. Both are at or near historic worst levels. Housing inventory tightness is the fundamental driver: low inventory is pushing Montreal home prices upward and sustaining Quebec City housing market prices with double-digit gains, with pronounced seller's market characteristics. RBC concludes that after interest rates stabilized, affordability deterioration in tight-supply markets has become the new normal, making Quebec the most severe region in Canada's divergence story.
⚜️ Montreal Area
Montreal was once viewed as a "safe haven" during the high-interest-rate cycle, but Q4 2025 marked a complete reversal: RBC's measure reached 50.4%, deteriorating for two consecutive quarters, with a 1.3 percentage point increase in Q4 alone (+1.1pp year-over-year). RBC's original text states: "Montreal has displayed much resilience in the past year with resale transactions off only slightly, and prices maintaining their upward trajectory in the face of economic turbulence. The flipside is it's become harder to afford a home."
📦 Deconstructing the Driver: Housing inventory tightness has reached historic lows, with new listings continuing to shrink. Montreal home prices have shown resilience, with transaction volumes only slightly lower while remaining competitive. RBC emphasizes: "For now, tight inventory maintains upward pressure on home values."
📊 Why SNLR Remains Elevated (Seller's Market)? The sales-to-new-listings ratio remains at elevated levels, with intense buyer competition and sellers maintaining pricing power. The result: A typical household needs 50.4% of pre-tax income to cover ownership costs (based on 20% down payment, 25-year amortization, 5-year fixed rate), far above pre-pandemic levels.
The shift from "safe haven" to "crisis zone" exposes Quebec's structural housing weakness—supply shortages combined with slowing income growth have quietly increased Quebec real estate investment risk. RBC notes that in such markets, "affordability ceased to recover when interest rates stabilized," with Montreal serving as a prime example.
🏰 Quebec City
Quebec City's RBC measure stands at 35.9%, with no improvement whatsoever this cycle, directly reaching its worst level in more than three decades. RBC's original text is unequivocal: "RBC's aggregate measure stands at its worst level in more than three decades." This is among the most severe characterizations in the entire report.
📈 Behind the Double-Digit Gains: Despite a relatively lower benchmark price, annual gains have reached double digits, creating a vicious cycle of low turnover and extreme inventory tightness. RBC notes: "Quebec City has been one of Canada's hotter markets with double-digit price gains in 2025."
🏠 Intense Buyer Competition: With new listings persistently low, Quebec City's housing market features intense buyer competition, with seller's market characteristics driving up ownership costs. RBC states: "Inventory remains historically low and buyer competition intense."
RBC specifically identifies Quebec City as a "prime example"—tight supply continues to support price appreciation while affordability stagnates. Local median household incomes cannot keep pace, putting the greatest pressure on first-time buyers. Unlike other markets, Quebec City has experienced no recovery window during this high-interest-rate cycle. The inventory crisis has evolved from a short-term phenomenon into a structural bottleneck, and Quebec real estate investment risk lies in the possibility that if demand suddenly cools, price corrections could be far more severe than current market heat suggests.
| Metric | Montreal | Quebec City |
|---|---|---|
| RBC Aggregate Measure (Q4 2025) | 50.4% | 35.9% |
| YoY Change | +1.1pp (Deterioration) | Deteriorated |
| Q4 Change | +1.3pp | Ongoing Deterioration |
| Historical Position | At or Near 30-Year Worst | Worst in 30+ Years |
| Cycle Improvement | Recovered in 2023, Reversed in Q4 | None at All |
| Price Trend | Maintaining Upward Trajectory | Double-Digit Gains |
| Inventory Status | Historically Low, Tight Supply | Historically Low, Extremely Tight |
| Buyer Competition | Intense | Intense |
| Market Status (HousingAI) | Elevated SNLR (Seller's Market) | Elevated SNLR (Seller's Market) |
| RBC Outlook | Tight inventory will sustain prices, but affordability will curb demand | Low supply will continue to support price gains |
RBC Original Text: "Winnipeg, Montreal, Quebec City and St. John's are prime examples. In these markets, affordability ceased to recover when interest rates stabilized in the fall." — After rates stabilized, affordability improvement in tight-supply markets ground to a complete halt.
📦 Inventory Crisis: Seller's Market vs Buyer's Market (Q4 2025)
RBC's Assessment: This divergence represents a return to normalcy, but Quebec's inventory crisis has evolved from a short-term phenomenon into a structural bottleneck.
🚨 RBC Core Warning: "Further meaningful advancement would require steeper price declines or more robust income increases—neither seem likely under our base case forecasts." Under the base scenario, affordability improvement in Montreal and Quebec City is extremely limited. Investors must look beyond the "seller's market illusion" to the structural risks beneath.
📋 Quebec Housing Market Strategies (Based on RBC Data)
🏠 Buyer Strategy
- Monitor SNLR decline as an entry signal
- Prioritize condos and other relatively affordable property types
- Use interest rate scenario stress tests to ensure cash flow security
📈 Investor Strategy
- Watch for liquidity risks behind the "seller's market illusion"
- Monitor new supply signals; avoid chasing peaks
- Long-term holdings require careful assessment of inventory crisis duration
🏛️ Policy Recommendations
- Short-term: Reduce development fees to stimulate new supply
- Medium-to-long-term: Accelerate approvals, increase mid-and-low-priced housing
- Interprovincial coordination: Address demand shocks from migration flows
💡 Conclusion: Without Solving the Inventory Crisis, the Alarm Will Continue to Sound
The worst affordability in 30 years for Montreal and Quebec City is no coincidence—it is the inevitable result of housing inventory tightness. RBC's report reveals a harsh reality: after interest rates stabilized, affordability improvement in tight-supply markets ground to a complete halt. Montreal fell from "safe haven" to "crisis zone," while Quebec City recorded its worst level in more than three decades.
Three Core Truths:
1️⃣ Quebec Is Overlooked by the National Narrative — Price declines in Vancouver and Toronto mask the deterioration in Montreal and Quebec City.
2️⃣ The Inventory Crisis Is the Sole Explanation — Elevated SNLR, shrinking new listings, and sustained price increases all point to the same root cause: insufficient supply.
3️⃣ Structural Risks Are Accumulating — After affordability peaks, demand suppression could lead to liquidity disruption, elevating Quebec real estate investment risk.
One-Sentence Summary: Quebec's housing market stands at a crossroads—without resolving the inventory crisis, affordability alarms for Montreal and Quebec City will continue to sound. Investors must look beyond the seller's market illusion, buyers should watch for SNLR declines as entry signals, and policymakers must accelerate new supply to market.
📚 Data Sources and Report Description
Primary Source: RBC Economics, "Affordability gains become weaker and sparser in Canada," March 31, 2026. Author: Robert Hogue, Assistant Chief Economist.
Data Period: Q4 2025 official data, released March 31, 2026.
Measure Definition: The RBC Housing Affordability Measure shows the proportion of median pre-tax household income required to cover ownership costs (mortgage principal and interest, property taxes, utilities), based on 20% down payment, 25-year amortization, and 5-year fixed rate. Benchmark prices are sourced from RPS Real Property Solutions.
SNLR Explanation: The sales-to-new-listings ratio is an RPS data metric referenced in RBC's report, with HousingAI providing interpretive analysis. SNLR above 0.67 typically indicates a seller's market with upward price pressure.
RBC Original Text Citations: "RBC's aggregate measure stands at its worst level in more than three decades." (Quebec City); "Montreal's aggregate measure increased 1.1 ppts since Q4 2024 with most of the deterioration taking place in Q4 2025 (up 1.3 ppts)."
HousingAI · Data-Driven Real Estate Insights · Counter-Narrative Stance
Sources: RBC Economics (Q4 2025 official data), RPS Real Property Solutions. RBC measure definition: Ownership costs as % of median pre-tax household income, based on 20% down payment, 25-year amortization, 5-year fixed rate. This analysis interprets RBC's March 31, 2026 official report. All data is consistent with RBC's report. Not investment advice.
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