A new report reveals home ownership across Canada – particularly condos – became more affordable in the third quarter of 2014, despite the broad increase in home values.

The Housing Trends and Affordability report issued by RBC Economics Research attributed the affordability to “rising household incomes, low and steady interest rates and cheaper utility costs in most parts of Canada,” including Toronto.

Craig Wright, senior vice president and chief economist of RBC, said the country’s housing market “is quite solid at this stage.”

His comments come as home resales are nearing the highest levels since 2010, with RBC noting resales increased for the eighth time in the past nine months in October.

But there have been balanced or soft conditions elsewhere in Canada despite the strong activity in Q3. The agency noted this split shows a price trend, where Calgary, Toronto and Vancouver are all seeing faster appreciations than other local markets. 

"A combination of gradually increasing interest rates and higher prices will likely reverse the improvement in housing affordability that took place in the past year and weigh more and more heavily on homebuyer demand in Canada," said Wright

Affordability measures for Q3 of 2014 dipped by 0.2 percentage points to 47.8% for two-storey homes and by 0.3 percentage points to 27.1% for condo apartments. The measure for detached bungalows went up by 0.1 percentage points to 42.6%. 

"Condos no doubt continue to be the more affordable ownership option in every market," Wright said.

The RBC Housing Affordability measure has been compiled since 1985 and is based on the calculated costs of owning a detached bungalow at market value. The higher the reading, the more difficult it is to afford a home at market values. 

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