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A home that recently sold in Vancouver.DARRYL DYCK/The Globe and Mail

The Globe's new Real Estate Beat offers news and analysis on the Canadian housing market from real estate reporter, Tara Perkins, and others. Read more on The Globe's housing page and follow Tara on Twitter @TaraPerkins.

The affordability of homes in Canada is caught in a tug of war between rising prices and lower mortgage rates. But the country's biggest bank predicts that that's all about to change.

Royal Bank of Canada will release its latest affordability study Tuesday, and it shows that higher prices won the latest round, with Canadian home prices rising at their fastest pace in almost two years. Calgary, Vancouver and Toronto led the charge, causing houses to become less affordable despite a reduction in mortgage rates.

But RBC chief economist Craig Wright tells me he thinks the dynamics will shift. He expects that, industry-wide, five-year fixed mortgage rates will likely rise by about 0.75 percentage points this year, followed by further increases next year. The growth in prices, meanwhile, is expected to simmer down.

While the tug of war will change, the end result is still likely to be further erosion of affordability.

"With prices levelling off, that will be neutral to maybe slightly negative for affordability, but as rates go higher, that will make affordability a bit more of a challenge," Mr. Wright says.

RBC looks at what proportion of a typical household's monthly pretax income must go to the cost of owning a home. Its measure rose 0.3 percentage points to 49 per cent for two-storey homes and by 0.1 points to 43.2 per cent for detached bungalows.

The measure for condos fell by 0.1 points to 27.9 per cent. (RBC, by the way, believes that affordability is the main reason why condos are becoming more popular).

But Canada's housing market is made up of very different regions. RBC's affordability measure for a two-storey home in Vancouver stands at a jaw-dropping 86.5 per cent, up by 0.6 percentage points in the latest quarter. In contrast, even though prices are picking up in Calgary, residents there are only spending about 35 per cent of the typical household's pretax income on two-storey homes (that's up 1 per cent).

Ottawa, and some markets in Saskatchewan, Manitoba and Atlantic Canada, actually saw affordability improve for at least some types of houses.

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