IMF which calls for 10% to 15% correction. During the last downturn in 1980s, prices declined by 13% throughout the country.
Prices for detached houses in Vancouver and Toronto are unaffordable says the bank. Homes are considered unaffordable when the cost of owning a house exceeds 39% of family income. The average detached house in Toronto consumes 43% of income. When the interest rates rises by 2 percent, last number jumps to 52%. If the economy remains weak, the bank expects a moderate price correction in both cities.
Toronto condo's are viewed as affordable by the bank. Currently it takes 23% of median family income to service condo costs. If the rates rise by two percent, that figure rises to 28%.
Just because Toronto's condos are considered affordable and detached houses not doesn't mean that one type of housing is over valued and another one is not. They both are. In fact, chances are that condos are more over valued than detached houses.
After the Toronto housing bubble burst in 1989, the real prices went down by 38% in the GTA and by ~50% in downtown Toronto. Condo's fell by 39% in GTA while all other housing types fell by approximately 27%. Back than condos consumed near 48% of median household income while detached house service cost was over 70% based according to RBC. While condos were more affordable to the consumer, they still dropped more in price than a detached house.
It is worth noting that during last housing bubble in Toronto homes were unaffordable because of high borrowing cost and not as much due to elevated housing prices. In 1989 mortgage rate averaged around 12%. In sum, borrowing costs conceal the housing prices by skewing the affordability index.
Full report link here (pdf).