Canada And New Zealand’s Housing Crashed. The Trillion-Dollar Wake Up Call For Australia
By: Niro Thambipillay
August 23, 2026
Canada and New Zealand have suffered long property downturns, prompting warnings that Australia could be next. Toronto apartments have lost up to a quarter of their value, while Auckland is down more than $300,000 from its peak. In this article, I compare the five pillars supporting each housing market and explain why Australia’s $12 trillion property market is facing very different conditions.
TL;DR
Canada and New Zealand combined weakening population growth, excess housing supply, rising unemployment, looser lending safeguards, and tax changes that encouraged existing investors to sell. Australia currently has the opposite mix in several crucial areas: strong population growth, a severe housing shortage, unemployment at 4.5%, mortgage serviceability buffers, arrears below 1%, and grandfathered investor tax changes that discourage selling. A nationwide crash is therefore unlikely on the evidence discussed, although individual suburbs can still fall, stagnate, or grow depending on local supply, affordability, and demand.
Key Takeaways
- People movement matters: Around 60,000 New Zealanders left in the past year, while Canada’s population growth has almost stalled; Australia’s population is still growing above its long-term average.
- Australia remains undersupplied: The country is falling short of the government’s 1.2 million-home target, while the HIA says roughly 1.9 million homes are needed for affordability.
- Employment conditions are different: Australian unemployment is 4.5%, compared with almost 7% in Canada and more than 5% in New Zealand during their downturns.
- Australian borrowers face stronger safeguards: Banks generally assess loans against an interest rate 3 percentage points above the actual rate, and major-lender arrears remain below 1%.
- Grandfathering changes seller behaviour: Existing Australian investors retain their benefits while they hold, reducing the incentive to sell and further constraining supply.
Why Canada and New Zealand Are a Warning for Australia
Canada’s property downturn has continued for about three years, with some Toronto apartments losing up to 25% of their value. New Zealand’s market has been falling since early 2022, and Auckland values are more than $300,000 below their peak.
These countries are useful comparisons because their economies, banking systems, migration patterns, and housing markets share many features with Australia. However, a meaningful comparison requires looking beneath headline price movements and examining the five pillars that determine whether demand and supply can support prices.
1. People Movement: Australia Is Still Growing
Around 60,000 New Zealanders left their country in the past year, and roughly 40,000 of them moved to Australia. Canada sharply reduced immigration, leaving population growth close to zero while some residents also chose to leave.
Housing demand weakens when more people leave an area than arrive. Melbourne demonstrated this after 2021, when interstate migration contributed to flat or falling prices while many other Australian markets boomed. Nationally, Australia currently has the reverse condition: population growth remains well above its long-term average.
2. Housing Supply: Australia Still Has Too Few Homes
Toronto added large volumes of apartment supply before population growth slowed. Auckland buyers now have around 15,000 properties to choose from, giving them time and negotiating power. Excess supply meeting weaker demand places sustained downward pressure on prices.
Australia is not building enough housing for its growing population. The federal target of 1.2 million homes over five years equals about 240,000 homes annually, yet construction remains well below that pace. The Housing Industry Association has argued that approximately 1.9 million homes are needed to restore affordability. With new construction exceptionally expensive, the shortage remains one of the key conditions separating Australia from a genuine property crash.
3. Jobs: Forced Selling Remains Limited
Real property crashes occur when buyers disappear while job losses force a large number of owners to sell. Canada lost more than 100,000 private-sector jobs during the first four months of the year and unemployment moved close to 7%. New Zealand entered recession with unemployment above 5%.
Australian unemployment has risen to 4.5%, so the direction deserves attention, but it remains below the levels seen in those countries and below Australia’s long-term average. If employment weakens materially, rate cuts would also become more likely, supporting mortgage holders and eventually improving buyer demand.
4. Lending Barriers: Australian Borrowers Were Stress-Tested
Australian banks generally test whether a borrower could afford repayments if interest rates were 3 percentage points higher than the actual loan rate. Before 2021, the buffer was 2.5 percentage points. That rule restricts entry, but it also provides a safety margin for borrowers who qualify.
New Zealand did not impose the same mandatory buffer, allowing many borrowers to stretch while mortgage rates were near 2% or 3%. When rates later approached 6%, more households came under pressure. Australia endured 13 rate increases without the predicted fixed-rate mortgage cliff causing a national crash, and arrears at the major lenders remain below 1%.
5. Investor Tax Changes: Grandfathering Changes the Outcome
New Zealand removed investor tax benefits in 2021 without grandfathering existing owners. Investor demand weakened and some existing investors sold, adding supply at the same time population movement was reducing demand.
Australia’s changes preserve existing benefits while an investor continues to hold. Selling means losing those benefits permanently, so many owners have a stronger reason not to list their properties. That can reduce new investor demand, but it can also choke resale supply and limit the forced-selling dynamic that drives a crash.
Why Sentiment Can Still Push Some Markets Down
The five pillars do not mean prices must rise everywhere. Negative sentiment is keeping some buyers out of the market, particularly in expensive parts of Sydney, Victoria, Brisbane, and the Gold Coast. Individual locations can also become oversupplied or lose residents even while the national market remains undersupplied.
At suburb level, conditions vary widely. Some areas are falling, some are flat, and others continue to rise each month because affordability is attracting residents into markets with limited supply. A 10% increase on an $800,000 property is $80,000, which illustrates the cost of treating every location as though it will follow the national headline. This is why choosing the right suburbs to invest in remains more important than trying to predict one Australian market.
What Buyers Should Do Now
The comparison with Canada and New Zealand supports preparation rather than complacency:
- Research population movement: Look for areas attracting residents rather than relying on national migration figures alone.
- Measure local supply: Compare listings, approvals, construction, and vacancy rates at suburb level.
- Protect affordability: Keep a repayment buffer and do not depend on future rate cuts to make the investment viable.
- Assess employment: Prefer diverse local economies with stable jobs and sustainable rental demand.
- Buy selectively: Avoid assuming that every affordable suburb will grow or that every expensive market will fall.
Niro’s conclusion is that Australia does not currently share the combination that broke Canada’s and New Zealand’s housing markets. A national crash is unlikely on these indicators, but investors still need to select the right locations and properties to capture growth while controlling risk.
Summary
- Toronto apartments have lost up to 25%, while Auckland is more than $300,000 below its peak
- New Zealand lost around 60,000 residents in one year, including roughly 40,000 who moved to Australia
- Canada’s population growth has almost stalled, while Australia’s remains above its long-term average
- Australia is falling short of its 1.2 million-home construction target, while the HIA says about 1.9 million are needed
- Australian unemployment is 4.5%, compared with almost 7% in Canada and more than 5% in New Zealand during their downturns
- Australian mortgage serviceability buffers and arrears below 1% reduce forced-sale risk
- Grandfathered tax treatment encourages existing investors to hold rather than sell
- Australia is not one market: suburb-level supply, affordability, jobs, and migration will determine performance
Frequently Asked Questions
Yes. Australia is not one property market. Local population movement, housing supply, employment, affordability, rental demand, and property selection can cause one suburb to rise while another remains flat or falls.
Australian lenders generally test whether borrowers could afford repayments at an interest rate 3 percentage points above the actual loan rate. This reduces borrowing capacity at purchase but gives qualifying borrowers a safety margin when rates rise.
When population growth exceeds new housing supply, buyers and renters compete for a limited number of homes. Australia is building below the federal target of 1.2 million homes over five years, while the HIA says approximately 1.9 million are needed for affordability.
A nationwide crash is unlikely under the conditions discussed because Australia still has strong population growth, a severe housing shortage, lower unemployment, mortgage serviceability buffers, arrears below 1%, and grandfathered investor tax changes. Individual locations can still fall or stagnate.
Their downturns combined weaker population growth or population loss, excess housing supply, rising unemployment, borrower stress, and policy changes that reduced investor demand. Those forces reduced buyers while increasing the pressure on some owners to sell.
About the Author
Niro Thambipillay
Niro is the founder of Investment Rise, one of Australia’s most trusted property buyers agencies. He has helped hundreds of first-time investors build property portfolios and was voted one of the most trusted Real Estate entrepreneurs in the Asia Pacific region (APAC 2022). Niro is also the author of “How to Build a Property Portfolio That Pays You an Income Every Month.”
