(CBC NEWS) Housing across Canada became more affordable in the second quarter of this year because mortgage rates dropped, according to a report from RBC.

Even with prices moving higher, homes became more affordable in nearly every market across Canada, according to RBC’s Housing Trends and Affordability Report.

The least affordable markets were Toronto and Vancouver, where hot competition for properties kept home ownership out of reach for most buyers, despite a marginal improvement in the quarter. Vancouver is the least affordable market with sky-high prices, especially for single family homes.

Most other cities saw housing affordability remain around historic averages, RBC said.

But new buyers in the quarter were treated to lower fixed-rate mortgages than they could have found a year ago, as banks reacted to falling bond yields.

That’s not a situation that will remain, RBC warns. Long-term rates are expected to move higher later this year in anticipation of the Bank of Canada's move to tighten policy in 2015.  

Rising rates would erode housing affordability across Canada and reduce demand, said Craig Wright, senior vice-president and chief economist. However he expects a slow rise in rates will lead to soft landing for housing.

"We remain of the view that any rise rates will be gradual and unlikely to unhinge either overall affordability levels or the market — we expect a cooling in activity, not a crash," Wright said in a statement.

Wright points to the rebound in sales activity in May and June that resulted in a 9.4 per cent seasonally adjusted advance in the volume of sales for the quarter. It was the strongest quarterly gain in nearly four years.

"We had anticipated a rebound in activity from earlier this year when the harsher than normal winter weather took hold, but the biggest drop in fixed mortgage rates in almost four years and resulting improvement in affordability also gave the Canadian housing market a boost of extra energy," he said.

New listings also surged by eight per cent.

The RBC Housing Affordability measure, which has been compiled since 1985, is based on the calculated costs of owning a detached bungalow at market value, but also is used to measure the cost of condos and two-storey homes.

CMHC says 83 per cent are owners, 17 per cent are investors - Richard Dettman (NEWS1130)

The picture of who owns condominiums in Canada’s two largest housing markets is somewhat clearer today after a report from a federal agency, but remains partly cloudy.

Canada Mortgage and Housing Corp. says 83 per cent of condo owners in Vancouver and Toronto live in them, while the remaining 17 per cent are held by investors. But the survey by CMHC does not include foreign or corporate investors, or even those who live in Canada but not in those two metro areas.

Chief economist Bob Duggan says CMHC is trying to find ways to get that information too.

CMHC found that about half of condo investors rent them out, while one third use them to house family members and 12 per cent plan to sell them at a profit within a year.

GARRY MARR (VANCOUVER SUN) - The number of homes sold in Canada’s most expensive market topped 3,000 in July, marking a fourth straight month sales have hit that level.

The Vancouver sales market has not been this strong in three years, according to the Real Estate Board of Greater Vancouver.

“The Greater Vancouver housing market continues to see slightly elevated demand from homebuyers, steady levels of supply from home sellers and incremental gains in home values,” said REBGV, in a release.

Residential property sales in the Greater Vancouver area through the Multiple Listing Service reached reached 3,061 last month, a 3.9% increase from a year earlier. Sales were also 3.8% above the 10-year average for the month. Sales were down 10.1% from a month earlier.

Prices also continue to rise with the board’s MLS Home Price Index composite benchmark price for all residential property reaching $628,600, a 4.4% increase from a year earlier.

“Today’s activity continues to put Metro Vancouver in the upper reaches of a balanced real estate market,” said Darcy McLeod, the board’s president-elect, in a statement.

The sales-to-active-listings ratio reached 19.6% in Metro Vancouver in July, having hovered between 18% and 20% over the last four months.

New listings reached 4,925 in July, a 1.5% increase from a year ago. However, it was a 7.8% decline from a month earlier.

The total number of properties currently listed was 15,617, a 6% decline from a year ago and a 2.5% decrease from a month earlier.