The winter buying frenzy in Canada’s housing market has given way to a restrained pace of sales that will culminate in prices flattening early next year, says a report from RBC Economics.

Not only is an uncontrolled upward price spiral now unlikely, low inventory and strong demand, as seen through historically strong resales, will prevent prices from falling. But despite low interest rates, housing prices are high enough that affordability remains a major problem in Vancouver and Toronto, and it’s a growing issue in Montreal, the second largest city in the country. Moreover, if inflation keeps running “too hot,” interest rates will begin rising, predicts RBC.

The report also stated that, in Toronto, affordability woes make the city’s real estate market vulnerable.

“After reaching sky-high levels at the start of the year, activity has slowed since spring,” said the report written by Robert Hogue. “But so have listings, which have kept the market extremely tight and prices under intense upward pressure. The heat has extended to the condo segment where prices are now firming. Overstretched affordability remains a significant issue and top vulnerability. A dip in population growth poses a risk, though it will be short-lived.”

However, broker Davelle Morrison of Bosley Real Estate Ltd. neither believes that prices will flatten in 2022, because the pace of immigration is expected to accelerate, nor does she anticipate that they will grow as much as they have during the last 15 or so months.

“I don’t expect them to flatten. I don’t expect them to rise uncontrollably either, but I feel like prices will keep increasing. Our borders just opened, so double-vaxxed people will come over,” she said. “I think we will see people from Hong Kong coming too—there are still a lot of Canadians living in Hong Kong wanting to come back, so no, prices will not flatten. People want to live here. They want to live in Canada.”

The report also says the likelihood of intervention in the housing market is very high considering there’s a federal election in less than two weeks and there could be a new government—although, citing the B-20 mortgage stress test amendment in June, RBC acknowledges that the Office of the Superintendent of Financial Institutions’ intercession actually strengthened household resilience.

The RBC report anticipates that competition for housing in Vancouver will be fierce going forward because of low inventory, and it says the city’s residential real estate market is vulnerable as a consequence of having the most expensive home prices in Canada.

Montreal, meanwhile, has seen a moderation of activity in its market through the summer, and that has slowed property appreciation.

“Sellers still have the upper hand,” said the report. “Affordability is a moderate but growing strain. Elevated rental apartment construction warrants close monitoring.”