If you’re worried about a Vancouver housing market crash, take heart — according to a new RBC report, a “wholesale collapse” is unlikely. Instead, the bank expects demand and prices to gradually “land” at more manageable levels in the near term.

RBC’s prediction is based partially on stats that show the Vancouver housing market has been cooling since February, when home resale activity reached a seasonally adjusted all-time peak. Overall, activity dropped 38% from then until August, with month-on-month declines increasing progressively over that period. Home prices have remained high, but in September the benchmark price for a Vancouver home fell for the first time in almost three years.

The bank sees home sales declines and price moderation continuing steadily for two main reasons. First, it believes the Vancouver housing market’s economic and demographic underpinnings “remain solid” — for example, interest rates are still low and job growth in the city has been high for the past year. Second, despite the new foreign-buyer tax, Vancouver is still in a good position to attract wealth and investment. Why? In RBC’s opinion, the city’s strong appeal for wealthy Chinese investors is unlikely to be shaken by the tax for long.

All in all, RBC is calling for home resale activity to fall 7% this year and 30% in 2017, and expects the aggregate benchmark price for a Vancouver home to be flat next year after gaining 25% this year. That said, there are definitely factors that could tip the market into a more extreme fall, and the bank has identified the five it sees as most important. Here’s a quick breakdown:

1. Policy
For RBC, policy “in its various forms and at various levels of government” is the factor most likely to influence the Vancouver housing market. The bank believes that if the new foreign-buyer tax is unsuccessful in moderating prices in the city, the BC government will likely introduce other measures.

2. The “foreign” element
While RBC thinks foreign-buyer activity in the Vancouver housing market will recover after the big drop seen in August, it admits that the tax has “introduced a thick layer of uncertainty.”

3. Speculation
Much of the frenzied market activity seen from early 2015 to early 2016 was the result of “buyers motivated by expectations of capital gains,” says RBC. That means if there’s a noticeable slowdown in home price increases in Vancouver, speculators could become sellers rather than buyers.

4. New supply
Vancouver has been short on housing since mid-2014, but builders have been rushing to correct that deficiency. Housing starts rose 8.6% in 2015 to reach a 23-year high of 20,900 units, and were up 46% in the first nine months of 2016. It is possible that supply may ultimately overshoot demographic requirements.

5. Local economy’s dependence on housing
BC’s economy is heavily dependent on the housing market, meaning that a sustained period of housing market weakness could negatively affect the economy. In a worst-case scenario, a correction could be caused by a “negative feedback loop” between the housing market and economy.

So what’s the takeaway? RBC is firm in its prediction that an orderly housing market landing is in store for Vancouver, but recommends watching home listings carefully for signs of a crash. If listings surge for a sustained period of time, it could indicate that speculators are “cashing in their chips.”

The bank also warns that even if the cooling it expects plays out, it’s unlikely to completely fix Vancouver’s housing affordability issues. While RBC sees condos and rental units becoming more attainable, it believes “owning a single-detached home in Vancouver is unlikely to ever become affordable by Canadian standards.”

Vancouver’s Housing Market is Set for a Slow Cooldown, but These 5 Factors Could Trigger a Crash by Charlotte McLeod | Buzz Buzz Home