First it was New Zealand and Canada, then the United States. Now, with warning signs flashing, Australians are asking whether their overheated property market is about to follow.
Across the Pacific, property bubbles are deflating. New Zealand’s housing market, once thought untouchable, has already suffered a stunning reversal. Prices have plunged by up to 30% in most regions, reversing the pandemic-era surge. Three years ago, few Kiwis could have imagined their homes losing a third of their value.
Canada too has come undone. At the start of 2022, Sydney and Toronto had near-identically inflated median home values – around A$840,000. Since then, Sydney has climbed by 10% due to the artificial government incentives and supply restrictions, but Toronto has collapsed by 20–25%. In raw terms, Toronto homes are now hundreds of thousands of dollars cheaper than their Australian counterparts. The Canadian central bank’s aggressive interest rate hikes, coupled with government restrictions on foreign buyers and immigration, turned a frenzy into a fire sale.
In the US, prices have dropped significantly across 20 of the 50 largest metro areas. Popular areas like Miami is down 20% from its peak, Austin 15%. Pandemic gains have been wiped out.
Why Australia Thinks It’s Different
Local "experts" line up on the news networks to insist Australia won’t be next. But that narrative ignores a broader truth: supply isn’t just about new construction. It’s about demand.
Australia’s demand ballooned during Covid when expatriates rushed home, fearing lockdowns and economic instability overseas. Immigration added fuel, but the real driver was Australians choosing “home soil” over uncertain global prospects. That surge has ended. Now, overseas opportunities – with higher wages and lower living costs – are once again luring Australians abroad. New Zealand was the same. Record of number of New Zealanders has left the country in the past 3 years.
Government Policies: A Conflict of Interest?
The Albanese government is fast-tracking its 5% deposit scheme, originally promised for 2026. Treasury predicts it will lift house prices only marginally – 0.5% over six years. Critics aren’t convinced.
With just 5% down, buyers face massive interest burdens on the remaining 95%. In many cases, the cost of servicing such loans will outstrip renting – all while principal debt barely shifts. If global trends spill over, why would young families take on near-certain negative equity?
The government is setting up a dangerous trap for Australian families.
The deeper issue, critics argue, is political conflict of interest. Many politicians even including our prime minister(s), treasurers, ministers, MPs and others own multiple investment properties. Policy, they say, has long been designed to inflate values, not curb them. First-home buyer schemes and tax incentives over the past five years have consistently propped up prices rather than reduced them.
The New Zealand Warning
New Zealand’s crash carries a sobering lesson. As values skyrocketed, record numbers of New Zealanders left for better wages and lower costs in Australia, Canada, the US, and the UK. Once prices began tumbling, demand dried up even further, creating a vicious cycle.
Australia’s situation looks eerily similar: a bubble inflated by Covid-era repatriation, government schemes, and speculative demand. Now, with wages turning stagnant again and cost-of-living pressures mounting, the bubble may have little left to support it.
Too Big to Save?
For years, Australians were told the market was “different.” Too much demand, not enough supply, too much investor appetite. But now the housing market is so inflated – so outsized relative to the economy – that even government levers may not be enough to prevent a spiral.
If a correction begins in earnest, Australia’s property bubble could unwind as fast as New Zealand’s or Canada’s. And unlike past downturns, this time the political class may be powerless to stop it.
