For real estate shoppers and sellers, Ottawa could be the city of two tales -- both of them good.

Continued strong market activity makes the capital a fine spot for sellers, yet a slight increase in resale home

affordability, as charted by price-watcher RBC, spells positive news for buyers.

"The Ottawa market seems to be enjoying the best of both worlds lately," concludes a report from RBC, which

takes in the Royal Bank of Canada and its subsidiaries.

The modest improvement for buyers, however, wasn't enough to dislodge Ottawa as the third least-affordable

city in Canada, based on the bank's measure of the proportion of pre-tax household income needed to service

the costs of owning a home.

The higher the measure, the more difficult it is to afford a home. For example, an affordability reading of 50 per

cent means home ownership costs, including mortgage, utilities and property taxes, take up 50 per cent of a

household's monthly pre-tax income.

In the last quarter of 2009, the measure for a detached bungalow stood at 40.4 per cent -- down 0.3 per cent

from the previous quarter.

That was eclipsed by Vancouver's sell-the-silverware score of 69 per cent (up 1.4 percentage points) and

Toronto's 49.1 per cent (up 0.1 percentage points).

Ottawa resales have reached near-record levels in recent months, fuelled by buyers taking advantage of

exceptionally low mortgage rates, the report says.

At the same time, a "generally restrained pace of price appreciation" has helped to nudge up affordability.

In February, the average sale price for residential resale properties of all types was $317,000, the Ottawa Real

Estate Board reported. The average condominium was $265,900, while the average across all other categories --

bungalows, two-storeys, etc. -- was $337,800.

For new construction, the average in December 2009 was $339,000 for all new homes and $$410,000 for

singles, according to the Greater Ottawa Home Builders' Association.

Of six cities surveyed by RBC, only Ottawa showed an improvement in affordability for all housing types.

The RBC report arrived even as the Canadian Real Estate Association was reporting a slight decline in resales

across the country for a second straight month, prompting predictions that Canada was returning to a more

balanced market for buyers and sellers. The largest decline was in British Columbia, where sales in February

were down 13.3 per cent from a month earlier. Strong sales in Ontario, however, brought the average decline to

just 1.5 per cent, based on seasonally adjusted figures.

While seasonally adjusted numbers for Ottawa were unavailable, unadjusted sales figures showed a big increase

in Ottawa, to 1,118 sales through the Multiple Listing Service in February from 713 the month before.

The RBC report projects that the cost of owning a home will continue to rise across Canada on strong demand

and limited supply.

"The anticipated and gradual rise in interest rates indicates that affordability is likely to gradually get worse as

rates return to normal levels," said Hogue.

Markets in B.C. and Ontario have the added pressure of the new harmonized sales tax starting July 1, which will

raise the cost of new homes in higher price-brackets. The HST will also apply to fees for real estate agents,

lawyers and others.

As well, the federal government's recent announcement of changes to the mortgage market could reduce

demand when the new rules take effect in April, the report notes. However, the precise market effect is

unknown at this point.

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