Canada’s housing affordability deteriorated for a third consecutive quarter, according to the latest Housing Affordability Index released on Tuesday by RBC Economics.

According to RBC, Alberta and British Columbia had the sharpest erosions in affordability driven largely by double-digit annual price gains. However, Alberta’s soaring price gains still leave the province below past affordability stress points.

Housing in Calgary and Edmonton remains more affordable than in Toronto, Montreal and Vancouver relative to incomes. Vancouver, however, is entering uncharted waters as it sets new records for poor housing affordability in two out of four classes, and the other two will likely do so later this year.

“Faster growth in house prices, the weakest annual growth in household incomes since the first quarter of 2005 and slightly higher interest rates have all combined to erode housing affordability in Canada,” said Derek Holt, assistant chief economist, RBC. “While there was a nationwide deterioration, the regional divide in housing markets intensified this quarter with distinct trends emerging out west compared to the rest of the country, particularly central Canada.”

The RBC Affordability Index measures the proportion of pre-tax household income needed to service the costs of owning a home. The most affordable housing class remains the standard condo, with an index of 27.5%. A standard townhouse is next at 31.4% followed by a detached bungalow at 39.4%. A standard two-storey home is still the least affordable housing type in the country with an index reading of 44.8%.

RBC notes that central Canada’s housing market is cooling. Quebec’s condo market is the only market to have improved in housing affordability this past quarter because of a drop in condo prices in the Montreal area. Housing affordability deteriorated for every other housing segment in Ontario and Quebec. Ontario’s deterioration, however, had to do with interest rate increases, and electricity rate hikes that more than offset the impact of falling natural gas prices on utilities’ costs. As a result, Ontario’s pace of house price growth has noticeably slowed.

Saskatchewan and Manitoba also witnessed affordability deteriorations whereas Atlantic Canada’s eroding housing affordability is being disproportionately driven by Nova Scotia, where a listings shortage is sparking price gains in a seller’s market.

RBC Affordability Index for a detached bungalow for Canada’s largest cities is as follows: Vancouver 68.2%, Toronto 43.9%, Montreal 36%, Calgary 34.6% and Ottawa 30.3%.