What happens if property prices drop 20pc? Ask New Zealand or Canada
Canada and New Zealand have never recovered from their pre-COVID property market records. It is worthwhile examining what we can learn.
When property prices drop 20%, as seen in New Zealand and Canada, the consequences ripple through the economy. New Zealand, for example, saw a 30% decline in property prices after inflation was taken into account, marking one of the longest property market downturns in its history. Canada experienced a 20% drop over the same period.
Both countries raised interest rates more aggressively than Australia to curb demand for housing finance since 2022. New Zealand's cash rate reached an unprecedented 5.5%, higher than Australia's peak of 4.35%. This aggressive rate hiking stifled growth, pushing New Zealand into recession multiple times and causing a significant exodus of young, highly skilled residents to Australia.
Immigration also played a role. Australia welcomed more immigrants than it built new homes, creating a housing shortage. Canada, however, restricted immigration heavily, exacerbating its housing woes. New Zealand's net migration ground to a halt due to high unemployment.
The political fallout is also significant. In both countries, the housing downturn is affecting household spending and retail sales, hindering economic growth recovery. Australia, already experiencing sluggish economic growth, faces mounting political pressure as property wealth, which has fueled consumption, begins to decline.
Written by urgent.news from ABC News AU's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
