Recession or not, Canadian housing is becoming more expensive again, one of the country's major banks says.

For the first time in a year and a half, the costs of owning a home increased during the third quarter, according to a report released Wednesday by RBC.

The bank measured the proportion of household income, before taxes, required to cover the costs of owning a home. It found that affordability dropped across each of five categories of housing. The largest change, for two-storey homes, was 1.2 per cent.

Rising mortgage rates and higher property values were behind the trend, RBC said. Demand for housing has also outstripped supply, making the market more competitive and pushing up home values.

While owning a home has become more costly, it's still significantly more affordable than it was a year ago, the report says. The increase brings the affordability of Canadian homes back to early 2006 levels, when the country's housing market "was shifting into high gear."

The rate for a detached bungalow rose by 1 per cent during the third quarter, by 0.7 per cent for a townhouse and by 0.5 per cent for a condominium.

"With such strong momentum in the housing market and the cyclical low in mortgage rates behind us, it seems unlikely that affordability will improve in the near future," said RBC senior economist Robert Hogue.

"The housing market still faces obstacles, as mortgages have become more difficult to handle for many Canadians amid challenging labour conditions. This is likely to persist until the economic recovery is well established and job creation is sustained next year."

Homes in all of the provinces and in each major city became more expensive. The trend was most pronounced in Vancouver, where the expense of owning a home rose by as much as 4.3 per cent. Calgary and Toronto also posted "notable increases."

The affordability of housing will likely hold steady or continue to deteriorate in the coming months, the bank said. That could hurt the recovery, if mortgage-holders are pushed into arrears in greater numbers.

"One of the challenges of the housing market's resurgence amid still-poor labour market conditions is that mortgage obligations are becoming more difficult to meet for a growing number of Canadian households," the report said.

With files from The Canadian Press

Highlights of the report, by province:

  • British Columbia: Home-ownership costs rose during the third quarter, after falling for five consecutive quarters. Housing demand grew faster than supply.
  • Alberta: Home ownership costs increased for the first time since late-2007, in the third quarter, thanks to more expensive mortgages rather than an increase in housing values.
  • Saskatchewan: Mortgage rates and property values both grew modestly, making housing more expensive for the first time in a year.
  • Manitoba: Recorded the smallest increase in the cost of owning a home, although demand is expected to grow over the coming year.
  • Quebec: Housing values reached new heights in many areas of the province, thanks partly to the drop in mortgage rates.
  • Atlantic Canada: The housing market remained one of the country's most affordable. Property values rose modestly, in step with a slim increase in home-ownership costs.