Home prices will slow sharply over the next 18 months according to the latest economic outlook from RBC.

The lender says that following a 10 per cent gain for prices in 2016, it expects this year’s growth to halve to 5 per cent with a further slow down in 2018 to just 1 per cent.

The decrease for 2018 will be exacerbated by increased interest rates and continued decrease in home sales, forecast this year to be down 5.3 per cent.

RBC says that there are early signs that the Ontario government’s policy changes to cool the housing market, especially in Toronto, are working and it hopes that the market will be balanced in due course.

On the overall economy, RBC’s economists are optimistic.

“Canada’s economy is on track to post its strongest gain in three years”, said Craig Wright, senior vice-president and chief economist at RBC. “While we don’t discount the risk of a slowdown resulting from the pending renegotiation of NAFTA or the expected cooling of the housing market, we remain confident the economy will continue to grow at an above-potential pace for the remainder of this year.”

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