Housing Markets Across the Tasman: Lessons from NZ and Canada's Dramatic Decline

New Zealand and Canada's housing markets have been on a downward trend since 2022, with Canadian prices shedding about 20% and Kiwi prices dropping close to 30% once inflation is included.

This decline has been attributed to the significant interest rate hikes implemented by both countries, with New Zealand's Reserve Bank setting an official cash rate of 5.5% and Canada's Bank pushing its official rate to 5%. These higher rates have stifled demand for housing finance and led to a prolonged downturn in the real estate markets.

Unlike Australia, which has only just begun its descent into property losses, New Zealand and Canada hiked interest rates far more dramatically. The contrast is striking, with Australian households having enough reserves to weather the storm due to sustained growth over the past five years.

The housing downturn in New Zealand and Canada is beginning to ricochet through the broader economy, with household spending restrained and retailers struggling in both countries. This has significant implications for Australia's RBA and federal government, who may face challenges in reviving economic growth given the sluggish Australian economy.