Local transactions fell by 3.9 per cent in the first quarter, and sales in April showed further softness, the report stated. RBC speculated that the hesitation could be related to deterioration in housing affordability late last year and in the first quarter of 2012, with prices rising by 0.4 to 0.9 percentage points during that time.
The numbers are not extreme compared to the national average, however, and are not expected to destabilize the market in the short term, according to the report.
RBC says home ownership was less affordable in most major Canadian cities during the first quarter, although Calgary and Edmonton bucked the trend.
The report on home affordability says its index deteriorated sharply in Vancouver and to a lesser degree in Toronto, Montreal and Ottawa – primarily due to higher real-estate prices.
But the bank's affordability index was unchanged in Calgary and improved in Edmonton compared with the fourth quarter of 2011.
The report tracks how much of a homeowner's income would be required to pay typical costs associated with owning a standard one-storey detached house.
In Vancouver, RBC estimates the combined cost of mortgage payments, utilities and property taxes rose 3.1 percentage points to 88.9 per cent.
In Calgary, by contrast, only about 36.7 per cent of pre-tax income would be required to pay for a standard bungalow – unchanged from the previous study – and in Edmonton the index improved by 0.4 percentage point to 32.4 per cent.
In Toronto, the index deteriorated by 1.2 percentage points to 53.4 per cent; in Montreal, the cost of ownership increased 1.2 percentage points to 41.4 per cent of income and in Ottawa it was up 0.9 per cent to 41.8 per cent.
“It became a little tougher on household budgets to carry the costs of owning a home at market prices at the start of this year,” said RBC's chief economist Craig Wright in a statement.
“Strong buyer demand was a principal driver of the modest rise in homeownership costs. While the deterioration in affordability was felt to varying degrees across the country, it was mild in most cases.”
He said the challenge will likely increase once the Bank of Canada begins raising interest rates.
“Exceptionally low interest rates have been the key force in keeping affordability from hitting dangerous levels in Canada in recent years,” Mr. Wright said.
“Affordability headwinds are likely to increase next year, as interest rates make their way towards more normal levels.”
He said RBC expects Canada's central bank will hike rates gradually, starting in the fourth quarter.
“A gradual pace of increases will allow income growth to provide some offset,” he said.
The report was published days after RBC posted a profit of $1.56 billion in its second quarter.