Vancouver, Toronto least affordable as Canadian home prices rise

Home ownership in Canada was less affordable in the second quarter as house prices climbed again in most cities, but demand should cool as new mortgage rules take effect, a report by RBC Economics showed.

The cost of owning a home edged up 0.2 percentage points to 43.4 per cent for a detached bungalow, and by 0.6 percentage points to 49.4 per cent for a two-storey home, while the measure for condos was unchanged at 28.8 per cent, the RBC housing affordability index showed.

Monday's report measured how much of a household's monthly pre-tax income is required to cover the typical costs of owning a home, including mortgage payments, utilities and property taxes.

"Market conditions remained fairly balanced across the country in the second quarter, laying the groundwork for further price increases, which in turn contributed to a decrease in affordability," Craig Wright, chief economist at RBC, said in a statement.

"We anticipate that the latest mortgage-insurance rule changes and prospects for further erosion in affordability will restrain home-buyer demand."

In changes that took effect last month, Finance Minister Jim Flaherty shortened the maximum length of an insured mortgage to 25 years, and capped the amount homeowners could take out with a home-equity loan, among other changes. The changes make it more difficult for homeowners to take on too much debt in Canada's red-hot housing market.