Prices could plummet, warns bank economist

The fear is that rising interest rates could have a massive impact on that city's housing market in the future. Petramala indicates that the prices of resale homes could plummet by as much as 25 per cent.

But that seems unlikely compared to the “gradual unwinding of excesses”  Petramala and other economists expect.

Their opinions are being shaped by projections for this year's growth.

While, in 2012, Toronto home prices increased by 6.8 per cent, and by another 5.4 per cent in 2013, for this year, prices are forecast to jump only 2.7 per cent. The drop for 2015 is only projected at 1.2 per cent when interest rates are expected to begin their upward trend.

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