Soaring land values and lack of room to build have pushed the cost of houses in Vancouver beyond the reach of the average family, making the city the worst in Canada for housing affordability, according to a Royal Bank report.

High housing costs in Vancouver is leaving families with no option but to buy condominiums, according the Royal Bank.
(CBC)

A average two-story house with a double garage sells for just under $650,000 in Vancouver, where the average family income is $59,000 a year, the report said.

It means that some couples aiming for a toehold in the housing market are left with no option but to buy a condominium in the suburbs.

"The condominium sector has really been the only safety valve in terms of this housing cycle to provide the first time home buyer with affordable options,'' RBC assistant chief economist Derek Holt said Friday.

That's because the carrying costs of an average house in Vancouver would eat up 79.2 per cent of the income of the average family, according to the report.

But some couples are having to move out of downtown Vancouver in order to find a condominium that they can afford.

Matt Ramsey and his partner Euphemia Redden said they paid more than $300,000 for a 1,000-square-foot condominium in suburban North Vancouver.

"I grew up in this neighbourhood,'' Ramsey said. "I have been here 25 years, and there is nothing more that I would like to do than stay here.''

"The only way we could have done it is with help from my dad to pay off my students loans, which we are so grateful for,'' said Redden.

"But if that hadn't happened we would still be renting," she said.

The Royal Bank report is projecting a fall in borrowing costs this year, potentially easing the pressure for some home buyers.

And while the recent home buying frenzy is expected to slow, house prices are expected to rise by another five per cent by the end of this year, Royal Bank says.