RBC forecasts that rising interest rates will see real estate sales drop by 10% over several years and the rise in prices slowing to 3.2% in 2016.
The report says: “It has long been our view that the eventual rise in interest rates from generational low levels will produce significant headwinds for Canada’s housing sector.”
However, it warns that, if interest rates rise more sharply than it expects in the first half of next year and unemployment also grows, there could be a severe downturn for the housing market.
This scenario is not expected though as RBC’s economists forecast growth in the economy for 2016.
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One of Canada’s largest mortgage lenders says that the housing market will slow in 2016 -- but only modestly.