Canada’s housing market is a lot like Australia’s. Like us, Canada had no major fall in house prices during the Global Financial Crisis. Like in Australia, official interest rates fell, making borrowing very cheap. House prices soared and household debt went with them.
Older and wealthier Canadians got caught up in a frenzy of investment while the younger portion worried about affordability. It could almost be Australia, right?
The epicentres of the boom were Toronto, Canada’s biggest city, and Vancouver, on the Pacific Coast. Their enormous house price boom continued until 2017. Then, while Australia was still appreciating, Toronto suddenly stopped. Toronto house prices entered a dramatic fall.
“‘The frenzy is over’: Toronto’s housing bubble finally pops,” screamed the headlines.
It sure looked that way. Toronto’s house prices fell fast. For two consecutive months in late 2017 houses were losing 3 per cent of their value a month, as this next graph shows.
What happened next is the surprise. The fall promptly stopped. Toronto stabilised and then prices kept going up.
I don’t want to say that will happen in Australia too. I can’t predict the future. But a lot of people are claiming they can predict the future just because they predicted the falls so far.
