Canada’s hottest housing markets are heading towards a severe downturn according to Capital Economics’ David Madini.

The economist warns that the rise in sales in Vancouver is a temporary jump while the slowdown in Toronto’s larger market is indicative of a price correction.

Madini says that the impact is likely to be felt outside the housing market with a drag on second-quarter GDP, perhaps taking it to just 1 per cent; but if not then the longer-term outlook “appears to be worsening.”

There could be a reduction in housing investment, lower consumer consumption and financial stability could even be impacted.

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