A report by RBC Economics says housing affordability continued to decline in Toronto and Vancouver, while conditions for homebuyers improved in Alberta during the first quarter of the year as lower oil prices caused the real estate market to soften.

RBC says mortgage rate cuts improved the affordability of homes in many Canadian housing markets where prices didn't accelerate too rapidly.

That offset rapid price growth in Toronto and Vancouver, leaving national affordability levels relatively flat.

RBC says demand in softer markets such as Montreal and Ottawa began to pick up.

Percentage of income 

The RBC Housing Affordability study measures the proportion of household income that is needed to service the costs of owning a home at current market values.

On a national level, RBC says affordability edged 0.3 percentage points lower for condos to 27.1 per cent, while for detached homes it declined 0.2 percentage points to 47.9 per cent.

The bank predicts that rate hikes from the central bank, which is expected to raise its trend-setting overnight interest rate next year, are likely to erode affordability.

"Exceptionally low interest rates have been a key factor keeping housing affordability levels in a largely manageable state in recent years," Craig Wright, RBC's senior vice-president and chief economist, said in a statement.

"The knock-on effect of the anticipated rise in rates would be most visible in high-priced markets."