Adrienne Warren said a single-digit decrease by mid-decade would represent a soft landing that many observers have predicted.
"There is some risk that single family home prices could fall but we see more risk on the condo market," she said in an interview.
Toronto prices have already flattened and Vancouver prices have fallen by five per cent, a better outcome than predicted.
While average Canadian real estate prices would be affected by the country's two most expensive markets, prices in most other areas of the country are relatively stable.
Aside from factors affecting individual markets, the biggest factor influencing prices is the outlook for the economy and job market, Warren added.
"Right now we're in a period of slow, sort of steady growth, but there are risks primarily from the international front so I think that will be a key determining factor on whether we would have a harder landing or see sort of steady activity."
Ryerson University business professor Murtaza Haider agrees that modest price decreases are a "real prospect."
"The question to be concerned about is not that they might go down, it's by how much," said Haider, associate dean of the Ted Rogers School of Management.
A decrease of one to three per cent shouldn't prompt panic, he added.
"If you take Toronto and Vancouver out, our housing prices are pretty stable."
Economic factors are supporting price increases in Calgary and Saskatchewan, while political calm has allowed Montreal prices to gain ground after long being depressed.
Haider said demand for housing in Canada will remain strong, driven primarily because of immigration especially to large cities like Toronto.
Toronto's housing market is correcting in the wake of affordability pressures, inventory build, changes to mortgage insurance rules and more cautious lending policies, Warren wrote in a "Global Real Estate Trends" report released Friday.
Sales and construction have already shifted notably lower, and prices are beginning to level out.
It also notes that, while there's a lag, prices tend to fall after sales drop off and the supply of unsold properties rises.
The report said the rebalancing will be manageable if new construction slows, population in the Greater Toronto Area continues to grow and interest rates remain low.
The Toronto Real Estate Board says prices have moderated but a short supply of low-rise buildings such as single family homes should continue to support overall price increases at least through next year.
"Until that situation changes, it's difficult to predict anything but price increases over the next couple of years," said Jason Mercer, senior manager market analysis.
The agency is forecasting a 3.5 per cent increase in average prices this year and around two per cent in 2014.
It hasn't prepared an estimate beyond next year but doesn't foresee prices falling because the low-rise segment accounts for 75 per cent of the overall real estate market in the Greater Toronto Area.
"With that kind of tightness in those categories — single-family, semis and townhomes — it's difficult to see any kind of protracted decline in prices over the next couple of years."
The Toronto condo market has been watched closely by policy makers in the federal government and Bank of Canada, as well as private-sector economists. While it's generally agreed that Toronto home prices are overvalued, there's a range of estimates about how much they will likely come down.
Finance Minister Jim Flaherty introduced stricter mortgage rules last summer to offset persistently low interest rates that have simulated borrowing and pushed up real-estate prices in some markets — particularly in Toronto and Vancouver.
The Scotiabank report said the new rules, repeated warnings over high household debt levels and moderate growth in employment and income, have resulted in a 10 per cent drop in resales of previously occupied homes in Toronto.
Lower expected returns are also tempering investor activity.
"Roughly 50 per cent of pre-construction condominium purchases in recent years are estimated to have been by investors," said the report.
Housing starts in the Toronto area totalled just 28,900 units on an annualized basis in the first four months of 2013, down about 40 per cent from last year, the report said.
Internationally, the report finds Canada and Australia at the mid-point between countries where prices have been rising (such as Colombia, the United States and Chile) where they have fallen (Spain, Italy and Ireland, among others).
— With files from David Paddon.
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