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Two story detached homes on Soudan Ave. in Toronto on August 31 2015. In Toronto, a standard two-storey house now consumes more than 67 per cent of the typical household income.

Fred Lum/The Globe and Mail

Canadian housing prices continued to soar in the second quarter of the year, eroding affordability for buyers even in the face of a falling dollar and weak economic growth. But while detached house prices are marching out of reach of buyers in Canada's hottest housing markets, they are becoming more affordable in many other regions.

Two new reports from Royal Bank of Canada and Toronto-Dominion Bank put the growing disparity between detached house prices in Toronto and Vancouver and the rest of the country into stark relief. Even as record-low interest rates have made house ownership more affordable than ever for many Canadians, it now takes 91 per cent of the average pretax household income to afford a two-storey house in Vancouver, nearly 4 per cent more than at the start of the year and roughly 40 per cent above the city's long-term average, RBC said. The figure takes into account the cost of a mortgage, property taxes and utilities.

In Toronto, a standard two-storey house now consumes more than 67 per cent of the typical household income, roughly 24 per cent more than the city's long-term average. Housing prices in the two markets have been rising at an "unsustainable pace," TD economist Diana Petramala warned. "The risk of a deeper correction rises with every month of double-digit home price growth."

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Both cities are also seeing a widening gap between the cost of houses and condos. In Vancouver, it now takes roughly 40 per cent of the average household income to buy a condo, while in Toronto the figure is just shy of 34 per cent.

The residential housing sector continues to defy expectations of a soft landing as buyers have rushed into the market to take advantage of low interest rates, TD said. The bank expects Canadian housing prices to end the year 7 per cent higher before starting to cool next year. It now takes 48.3 per cent of the average income to afford a two-storey house, up slightly from the first three months of the year and roughly 10 per cent above the long-term average. Buying a condo, meanwhile, takes up about 27 per cent of the average household income, with affordability remaining roughly in line with the long-term average.

Affordability took the biggest hit in British Columbia thanks to what RBC calls "the extreme situation in Vancouver." The average household would now have to spend almost all of its income to afford a detached house in the city, with affordability reaching an all-time low for any market in Canada. While no other B.C. market comes close to Vancouver, RBC noted that prices have been heating up in other regions of the province, including Victoria, Fraser Valley, Chilliwack and Kamloops.

A recovery in oil prices in the second quarter helped restore confidence in Alberta's housing market, although the more recent drop is likely to keep buyers nervous. Prices in the province have held up remarkably well, but slowing sales and low interest rates have created opportunities that many buyers haven't seen in years.

"Owning a home in Calgary at market price remains more affordable than it has been on average since the middle of the 1980s," RBC economists Craig Wright and Robert Hogue wrote. Housing prices should start to fall further as the months wear on, TD said. Already, houses are taking longer to sell, as both Calgary and Edmonton are still in the midst of a residential construction boom started when oil prices were high. Edmonton, in particular, now has more new housing under construction per capita than in either Toronto or Vancouver, TD's Ms. Petramala noted.

Saskatchewan's housing market has been hard hit by the drop in prices for oil and other commodities, although buyer confidence rebounded in the second quarter of this year, with prices of detached houses become slightly less affordable, RBC said. Condos remain a comparative bargain because of a glut of supply. In Regina, which is facing a backlog of unsold condos, resale housing prices dropped 5 per cent in July from the same time last year, which TD said reflected a jump in new housing on the market rather than a sharp drop in demand.

In contrast to many other parts of the country, two-storey houses in Manitoba were the only segment of the housing market that got cheaper for buyers, with prices rising for condos and bungalows. It now takes 36.5 per cent of the average household income to afford a two-storey house, down from 37 per cent in the previous quarter. Manitoba's market should rebound later this year, TD predicted, given that the economy has churned out nearly 10,000 new jobs since December and the province is less exposed to falling oil prices that other regions. Developers have been holding on to record levels of unsold condos, however, which should keep prices affordable for condo buyers.

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Ontario's housing market has become a study in contrasts. Bungalows and two-storey houses continue to skyrocket, while condo prices have stayed comparatively flat. It now takes 52.3 per cent of the average income to afford a bungalow in the province, a two-year high, compared with 28.8 per cent of income for a condo.

The gap is being driven by a major shift in new housing construction. Ontario is in the midst of a boom in condo construction, while there are now half the number of single-family houses being built in the province compared with a decade ago, RBC said.

With prices of single-family housing rising at double-digit rates in Canada's largest city, "affordability in Toronto is moving ever closer to the historically poor levels that prevailed in 1990," RBC wrote, "which may signal that risks are mounting because those were associated with a housing bubble at the time."

Meanwhile in Ottawa, years of sluggish housing price growth and a spike in the supply of newly built condos have made owning housing in the capital city more affordable. New housing listings hit a 15-year high in the city, while demand has been held back by government belt-tightening. "In a fiscally constrained world, job prospects in Ottawa are likely to remain soft in the coming months, keeping housing activity in check," TD said.

Housing ownership has become cheaper than at any point in the past decade in Quebec as weak economic growth and the fallout from an earlier condo boom has kept prices down. It now takes 40 per cent of the average household income to afford a two-storey house in the province, and 25 per cent for a condo. Montreal buyers saw the biggest boost to affordability of any major urban market this year, with the average Montrealer spending 46.3 per cent of their household income to buy a two-storey house, down 1.5 percentage points from the start of the year.

While low interest rates, a cheaper dollar and an improving U.S. economy are expected to help boost Quebec's housing market this year, the province faces a number of challenges, TD said. Most significantly, migration both internationally and from other parts of the country has fallen to a 15-year low, which has affected demand in the housing market.

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The housing market in Eastern Canada has been struggling for the past two years as a result of an aging population and a poor job market. That has made housing prices in the region more affordable for cash-strapped buyers.

While existing housing sales have risen this year in Newfoundland, New Brunswick and Prince Edward Island, it hasn't been enough to offset a jump in new listings. In Halifax, housing resales hit a 17-year low amid a spike in new listings, although TD predicts that an improving economy, population growth and the start of work on a major federal shipbuilding contract should help boost the city's housing market this year. Atlantic Canada remains among the country's most affordable housing market, with two-storey houses consuming less than 34 per cent of the average household income.

"The upside of persistent price stagnation in large pockets of Atlantic Canada is that housing affordability improved further in the region," RBC wrote.

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