The sky high prices currently seen in the Canadian real estate market aren't going to last, says a report by global rating agency Fitch Ratings.


The agency forecasts that home prices are in for a "soft landing" and will flatten out or decrease slightly over the next five years.


It estimates that current house prices are overvalued by up to 26 per cent in some regions, and will fall by as much as 10 per cent.


The report says many homebuyers have financially stretched themselves to borrow for their home purchase and will be in for a shock once interest rates start to climb.


Fitch Ratings says home prices have surged more than 130 per cent since 2001, outpacing income growth by more than 80 per cent.


It also noted that low levels of unemployment and proactive government policy will help shield the economy in the event of a decline in home prices.