Housing affordability showed signs of continued erosion in Western Canada in the last three months of 2006, economists at Royal Bank said Thursday.

In Alberta, which has seen big economic growth thanks to the oilsands and the oil and gas sector, affordability continued to slide in all types of housing, although at a slower pace than earlier in the year.

RBC Economics said the erosion in affordability "appears to have topped out and has slowed significantly."

RBC's affordability index — the proportion of household income needed to fund the cost of owning a home — fell by one to two per cent in the fourth quarter, compared with a 12 to 15 per cent slide in the third quarter.

"Going forward, price increases are expected to moderate and volumes decline although they will remain near historically high levels," said  RBC assistant chief economist Derek Hall.

In British Columbia, where 2006 marked the biggest slide in affordability since the early 1990s, the cost of carrying a two-storey home and a detached bungalow showed improvement, but condos and townhouses showed a fifth consecutive quarter of deterioration.

Saskatchewan also registered a fifth straight period of falling affordability for bungalows, condos and townhouses. RBC said housing price increases outweighed income growth and lower mortgage costs.

From Manitoba east, housing affordability continued to improve in all four categories of homes, RBC said.

According to RBC's housing affordability survey of detached bungalows in Canada's biggest cities in the fourth quarter, a home in Vancouver required about 68.5 per cent of pre-tax household income, while a similar home in Toronto required 42.6 per cent.

In Calgary, the figure stood at 40.9 per cent, 35.3 per cent in Montreal and 30 per cent in Ottawa.