Amid tighter housing rules and rising interest rates, the Canadian real estate market is facing several years of "retrenchment" and slow price gains, a new report from Moody's Analytics suggests.

However, the moderation won't be even across the country, says the author of the report.

"Exact turning points are difficult to predict, but the combination of restricted mortgage lending, taxes on foreign purchases in the largest metro areas, and the expectation of higher mortgage rates means that house prices are likely to experience a slowdown in the next few years, especially if speculative home purchases in Toronto and Vancouver are reduced or shut down," Moody's director Andres Carbacho-Burgos said in the study.

He said that while Greater Vancouver and Toronto will avoid any significant house price downturn, it is likely that Quebec, the Prairies, and the Atlantic provinces will have at least minor house price corrections.

Nationally, the price for a single-family house will undergo a "dramatic deceleration" when compared to the 14.5  per cent annualized growth rate seen in the second quarter, he said. That growth rate is projected to slow to 1.3 per cent between the second quarter of this year and the same quarter in 2022

Hamilton, Oshawa, Toronto buck the trend

Ontario metropolitan areas will buck the trend, thanks to imbalances in several regions, with the price of single-family homes in Toronto expected to grow by average annualized rate of 7.7 per cent.  Areas around Toronto are also expected to show prices gains over the same five-year period, with Oshawa to follow close behind Toronto at 7.5 per cent, while Hamilton is forecast to see 5.8 per cent annualized growth.

Vancouver, which along with the Greater Toronto Area has been responsible for much of the froth in the housing market, is forecast to see roughly level house prices over the next half decade.

Among other metro areas, Montreal house prices are forecast to decline by an annualized rate of 0.6 per cent over five years, while Calgary is expected to see an average annual decline of 1.1 per cent.

At the bottom end are expected to be Thunder Bay, projected to see a rate of decline of 5.4 per cent, and St. John's, which is forecast to see a rate of decline of 6.1  per cent. Carbacho-Burgos cited falling median income combined with slow-to-negative population growth and household formation for the expected drops in those two cities.

Last week, the Bank of Canada boosted a key interest rate for the second time this year, leading Canada's big banks to bump up their prime rates, which means rising interest rates for people on variable mortgages. Some observers have also suggested the central bank may not be finished hiking rates this year, with some pointing to a possible rate hike in October.