Quote:
Originally Posted by whatnext
Canada's market is very similar to Australia's in many ways (large country, small population and demand driven by overseas buyers in key urban markets) and it will likely follow the downward trajectory of Australia:
|
While there are some similarities between the Canadian and Australian property markets, there are also significant differences. Both saw significant price increases for housing in cities over several years, and both have seen generous lending practices lead to record levels of household debt. Overseas investors have been accused of driving up prices in both countries, and the impact of that investment on the overall market has been disputed in both countries. The article you reference says investors aren't buying properties as prices fall - it doesn't say foreign investors.
Temporary residents can invest in new property, but they can only buy one existing residential property and must use it as their primary residence. If they’re not living in it they must sell it. Foreign investors can only buy new properties or vacant land in Australia.
In Australia, "In October, the ABS calculates that total value of housing finance commitments was 9.9% below what is was 12 months ago – the biggest 12-month fall since December 2010 in trend terms. The fall in investor housing financing commitments was 17.7%, but it would be wrong to suggest the drop was all due to investors – owner-occupier financing is down 3.6%" [
source]
The house price drop in Australia according to most reports is due to tighter lending controls, and the feedback loop that sees fewer people willing to buy in a falling market - exactly as we've seen in Vancouver in the past 6 months or so. Prices in Australia (or at least the main cities) are expected to fall further in 2019, just as they are here. (Note that while Melbourne’s median home price has fallen 4.6% this year, slightly ahead of Sydney where values have declined 4.4%, median prices have actually increased in Brisbane and Adelaide since the beginning of the year.)
A significant factor is that lenders there are now applying more strict lending criteria to first time buyers (although not as stringent as the stress test here). Nearly half the loans in Australia have in the past few years have initially been on an interest only basis. That's been less true here, although it is a concern with some Line of Credit lending - although it's far less prevalent than in Australia, and it too is now being stress tested. Those Australian loans are converting to normal mortgages, so payments are going up just as values are cooling. That's almost guaranteed to see housing sales decline, and prices also drop in a feedback loop.
Just like here there are a number of factors impacting house prices. Changing lending rules, overseas buyer rules (or surcharges), changing exchange rates and investor expectations of returns all have some impact, but it's impossible to say how much each contribute. Foreign buyer purchases here and there were a very small proportion of the market. Logically it's the financial cost (and anticipated return for investors) and also the costs and availability of financing for resident buyers that is the much greater factor in setting market prices.