Scenic view at Toronto city waterfront skyline at sunset
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Aspiring homebuyers are facing the toughest market since the early 1990s, according to a new report from RBC Economics.

Due to the combination of “sky-high” prices and rising interest rates, Canadians are in the least affordable market in a generation, the report said, noting that the bank’s housing affordability metric deteriorated in the first quarter.

“Ownership costs rose in every market we track, though the degree of pain felt by buyers varies dramatically across the country,” it said.

In particular, the housing markets in Vancouver, Toronto and Victoria are reaching extremes in terms of unaffordability, the report said.

“Becoming a homeowner is now also very hard to achieve in other parts of southern Ontario and B.C.’s Lower Mainland,” it noted.

Conversely, markets in the Prairies and some East Coast markets remain relatively affordable, it said.

Looking ahead, the report predicted that affordability will get worse before it gets better.

“The Bank of Canada’s ‘forceful’ interest rate hiking campaign will further inflate ownership costs in the near term, putting RBC’s national affordability measure on a path to worst-ever levels,” it said.

Ultimately, a drop in housing prices is expected to reverse the trend of eroding affordability.

“Property values, already slipping, are likely to fall more than 10% in the coming year,” the report said.

The overheated markets in Ontario and B.C. are expected to fall further, it noted, with smaller retreats expected for the Prairies, Atlantic markets and Quebec.