The potential for widespread downturn in Canada’s housing market in the next 12 months remains low but has increased due to possible overreaction to policy action in Ontario and for further policy tightening.

In its July Canadian Housing Health Check, the lender says that local housing risk indicators “still show unusually high risks and vulnerabilities in Toronto and other southern Ontario markets.” RBC adds that the recent easing of price appreciation is welcomed and that risk profiles in other markets generally continued to improve.

Affordability is significantly outside historic norms and poses a much higher risk than normal in Vancouver and Toronto, while Montreal is moderately outside historic norms. The other major markets are within historic norms and are not posing any immediate threat.

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