Vancouver's sky-high housing market seems primed for a correction, while prices could soften in Toronto and stabilize in Calgary, a report from BMO Nesbitt Burns says.

The average home in the British Columbia city now costs 11.2 times an average family's income -- more than twice the national rate. That rate is double the ratio of a decade ago.

An average home goes for $373,000 nationwide, while in Vancouver the average price is $815,000.

But BMO senior economist Sal Guatieri says a correction in Vancouver will likely be less severe than previous ones.

"Four corrections in the past three decades saw declines averaging 21 per cent. However, if interest rates stay low and wealthy immigrants continue to pour into the city, prices could stabilize sooner than in past downturns," he said in a statement.

Vancouver's house prices have nearly tripled in the last decade. The BMO report says demand from China has been strong, because of fewer travel restrictions and stricter purchase rules and high prices there.

Vancouver's prices, after only being a tad higher than those in Toronto in the early 2000s, are now 71 per cent higher than those in Canada's largest city.

The BMO report says average housing prices across the country have doubled in the past decade, to a new high hit in April.

"Prices are 5.1 times median family income and housing costs an extra two years of gross income compared to 2001, when the boom began and valuations were closer to historic norms," Guatieri said.

The report says historically low interest rates have yet to make housing affordability a major issue yet, but that could change if there's even a moderate rise in interest rates.

The report compared Vancouver's market to those in Toronto and Calgary.

Toronto's prices should be stable in a low interest-rate climate, the report says, but could soften if rates increase in the next few years.

Calgary's housing prices have doubled within the last four years, but have yet to hit the highs set before the recession.

"Barring a sharp pullback in energy prices, Calgary's house prices stand a reasonable chance of growing alongside incomes in coming years," Guatieri said.

Average home prices in April 2011: (10-year change in brackets)

  • Nationwide: $373,000 (122 per cent)
  • Nationwide (without Vancouver): $337,000 (111 per cent)
  • Vancouver: $815,000 (188 per cent)
  • Calgary: $412,000 (127 per cent)
  • Toronto: $477,000 (91 per cent)