Yes, it's unreasonable to think the prices will drop 10-20% in that time frame.
Housing prices are not an equation that can can be solved to "home prices are X% overvalued." You have 3 answers so far, Quanty's "prices are inversely proportional to rates," Rob's "there's no strong correlation between interest rates and house prices," and MB's, "rising interest rates create downward pressure on housing prices."
Any research into price history had better take every other variable into account. Articles that look at rates vs price don't always address a key item, income. Say we agree that the data show your city to be 10% too high. But if sellers like their high price and have some 'dig my heels in' power, prices won't drop. The seller simply stays put, and the supply/demand curves result not in a lower price, but in less supply. And the effect is to change the demographic of that area, i.e. attracting higher income earners.
Rob linked to an article with a nice set of charts. One chart showing the US30 yr fixed rate and 'Real House Prices'. What results is a chart that can refute the relationship between rates and prices. But that would ignore an historical point that's too important to forget. The tumble that started in Jan '06 had nothing to do with the 30 year rate. It was the result of a series of insane financial products including 'interest only option ARMs' which permitted buyers to get approved for a purchase based on a payment that wasn't fixed, and would change to a fully amortizing mortgage at a higher rate that was unaffordable. A product that was a financial time bomb. Canada Banks offered no such product, and when the US market got pneumonia, Canada experienced a mild cold. With respect to any answers that offer US centric data to prove any hypothesis, I don't feel such comparisons are appropriate.
Correlations, and the data used to prove them are an interesting thing. I can suggest that you take the US 30 year rate, along with our median income, or rather 25% of monthly median income. Calculate the mortgage that results. This translates nicely to the home a median family can afford. And I claim that long term this is the equilibrium price of that median home. But supply/demand has another factor, 'stickyness' or the more technical term, 'inelasticity of demand.' This means that for example, a 10% increase in the price of cigarettes does not cause a 10% drop in consumption. Each and every good has its own elasticity, and in the case of housing, a rise in cost would certainly impact the marginal buyers, but others will simply adjust their budgets. Not all buyers were planning to hit the bank's limit on what they could afford, so the rise doesn't change their mind, just their budget.
Last - I know that Canada does not have a 30 year mortgage, most common is a 5 year rate with 30 year amortization. (correction/clarification, anyone?) The effect of this is less volatility in the market, since I believe your rates are not poised for the 2.5% to 4% jump implied by another response. Small increases can be absorbed.
In a beautiful coincidence, the Federal Reserve Board sent me a link to The Interest Rate Elasticity of Mortgage Demand: Evidence From Bunching at the Conforming Loan Limit. It's a bit long but a worthwhile look at how the correlation isn't as instant as some might think.