Lessons From Australia
In case you haven’t heard, the hottest real estate market in the world right now is in Australia. It’s like Calgary in 2006 down there! This recent Globe and Mail article outlines the situation with our Commonwealth cousins down under and is worth a read. Some interesting tidbits from the article if you don’t have time to read it:
- The Australian method of selling houses by live auction makes our Toronto practice of ‘bidding wars’ seem pretty tame and civilized.
- Australia has a population of 22 Million with the largest city being Sydney with 4.5 million in the metro area. Sounds very similar to Toronto’s relationship to Canada. The average home price in Sydney is $580K. The average home price in Toronto is about $450K.
- 5-year mortgage rates are at around 8% in Australia while this boom has been happening. Gives pause to those who say that the only thing driving our market here are the ultra low interest rates.
- Property values have increased by 18% in Melbourne over the past year. Prices in Toronto are up around 5% over the past year.
What is driving this real estate boom in Australia? Sounds like the same things as here: cheap pricing by global standards, immigration booming to the urban centres, shortage of new housing supply, strong overall economy with good jobs, and relatively low interest rates. The key difference is that a crash is a stronger possibility in Australia because values have increased so much, so fast, whereas in Toronto we are slowly and steadily rising as we have been for the better part of the last 15 years.
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