Houses kept getting less affordable during the first three months of this year as prices and mortgage rates increased, an RBC Economics study suggests.

The Royal Bank housing affordability report found the cost of owning a home - including financing, utilities and property taxes - rose faster than incomes for the second consecutive quarter.

And while affordability will likely worsen further in the current quarter, rising incomes and cooling housing markets in most regions should improve the picture in 2007, said RBC economist Derek Holt.

"The economies of B.C. and Alberta are driving most of that affordability deterioration," Holt said. "There were small deteriorations in every other province, but the biggest change was in B.C. itself."

House prices have risen 17 to 20 per cent in B.C. compared with a year earlier, while Alberta has seen a 25-per-cent hike.

"I would characterize the pace of price appreciation in B.C. and Alberta as not being sustainable," Holt said, noting the gains are far outstripping income growth.

The RBC affordability index measures the proportion of average pre-tax household income needed to cover the costs of owning a home.

The most affordable housing class remains the standard condominium, with a first-quarter index of 27.4 per cent, up from 25.7 per cent in the fourth quarter of 2005.

A standard townhouse was next at 31 per cent, up from 30 per cent three months previously, followed by a detached bungalow at 38.8 per cent, up from 37.1.

A standard two-storey home carries an index of 44.5 per cent, compared with 42.8 per cent in the previous quarter.

"The continued upward pace of resale prices and mortgage rates into the second quarter of 2006 does not bode well for near-term affordability," Holt observed.

Looking ahead, job creation, rising incomes and a housing market slowdown should improve affordability next year, he said.

Most provinces other than B.C. and Alberta are starting to see a "controlled cooldown" in prices, home construction and resale volumes.

"Instead of prices growing by 10 or 11 per cent, they are more likely to grow at a more modest mid-single-digit rate of appreciation, east of everywhere outside of Alberta and B.C.," Holt said.

"The big wild card is that B.C. and Alberta are so significantly distorting the national measures right now, and they are not showing any signs as yet of slowing up in terms of price gains. But eventually that will happen."

Meanwhile, another survey confirms booming communities in Alberta and B.C. have led the country with dramatic house price increases over the past five years.

Century 21's five-year comparison national house price survey for spring 2006 said the increases across Canada are the result of a robust economy.

"Price increases over five years for typical homes across the country in a selection of markets surveyed by Century 21 range from as high as 129 per cent in Vernon, in B.C.'s Okanagan Valley, to as low as 12 per cent in Thunder Bay," the report said.

The survey included 38 markets across the country.

Other red-hot housing markets include:

* Calgary northeast, up 121 per cent.

* Fort McMurray, Alta., up 105 per cent.

* Kelowna, up 89 per cent.

* the Winnipeg suburb of St. Vital South, up 64 per cent.

Century 21 president Don Lawby said the economy continues to provide job stability and consumer confidence combined with moderate mortgage rates resulting in stable price growth on the Prairies, in Central Canada and in Atlantic Canada.

He added: "In British Columbia and Alberta, the same economic factors plus booming energy and construction sectors have produced dramatic house price increases."

In a separate report released by the Canada Mortgage and Housing Corp., the CMHC suggests that consumer intentions to buy a home across five key markets remain strong this year because of low mortgage rates and a strong job market.

The study found that more than 380,000 householders in Halifax, Montreal, Toronto, Calgary and Vancouver indicated they're ready to buy a home this year.

While eight per cent said they have a high chance of buying a home and could be considered "ready to buy" within the next 12 months, five per cent indicated that they have a 50/50 chance of buying.

"Intentions to buy are up from 2005, when five per cent of households were ready to buy a home," commented CMHC chief economist Bob Dugan.