A new report says the cost of owning a home is increasing in markets across Canada, putting homeowners under more pressure as their mortgage rates rise.
RBC Economics Research says higher housing prices and mortgage rates have been the driving forces behind the decline in housing affordability in the second quarter of 2010.
This has left Canadian homeowners under "greater than usual stress," the report says, with the housing market in Vancouver being among the most vulnerable in the country.
The report says the Vancouver market -- the most expensive in the country -- is at a point where property owners are paying almost as much as they ever have to own a home.
That raises "a red flag" and the Vancouver market may well see a price correction, the report says.
Robert Hogue, the RBC senior economist who authored the report, says "the one market that really sticks out is the Vancouver market."
On Monday morning, Hogue told CTV News Channel that Vancouver's home ownership costs are well above other cities and close to their record highs.
In Toronto, it is currently more expensive to own a home than it has been on average, historically, and housing prices have stayed steady in most cases, despite decreasing sales.
Fewer people bought houses in Ottawa during the second quarter, to a point where sales were even lower than at the start of the recession. Despite the sales downturn, RBC says the cost of owning a home is increasing in Ottawa, a situation that may dampen buyer activity in the near future.
Montreal is also getting pricey for homeowners, despite a historic trend of being more affordable than other big cities in Canada. In particular the cost of owning a two-storey home "is closing in on the all-time high," the report says.
Hogue told CTV News Channel that ownership costs in Montreal and Ottawa are both near their record highs, though compared to the national average, they are "still not at worrisome levels, but certainly we want to keep an eye on those markets."
Overall, the Ontario and British Columbia markets saw the greatest drop in housing affordability -- mainly because their high-priced properties carry heavy mortgages that are sensitive to interest rate increases.
Alberta and Saskatchewan were two markets that saw some improvement in affordability, the report says, though only for Alberta condominiums and Saskatchewan townhouses.
All other provinces saw modest declines in affordability, the report says.
Looking ahead to the near future, RBC predicts that housing prices will stay relatively stable, though increasing interest rates will push up the cost of carrying a mortgage.
