are rising rapidly, bringing to a close the era of easy money that’s defined the years since the 2008 global financial crisis. There are also implications for household wealth and economic growth at a time when recession risks already hang over many countries.
Today, the economy is in better shape. But after a nearly unbroken 25-year period of price increases, Toronto looks shaky again. Affordability is as bad as it was during the late 1980s bubble, according to National Bank of Canada. Royal Bank of Canada’s economics department calls it a “historic correction,” and says national home resale volumes may fall more than they did in the early 1990s, peak-to-trough.
About two million unfinished homes presold by developers have halted construction, according to estimates from S&P Global Ratings. That’s reminiscent of a property bust 30 years ago on Hainan Island, the country’s tropical resort island dubbed “China’s Hawaii.” In 1999, the State Council stepped in to help resolve unfinished projects, including turning part of them into subsidized housing for low-income workers. The government has turned again to that playbook, offering 200 billion yuan in special loans to ensure stalled housing projects are delivered.
Values are falling faster than they were during the early 1980s and the early 1990s recessions, according to Tim Lawless, research director at CoreLogic.Article content “Arguably households are much more sensitive to the cost of debt now than what they were back in those previous recessions,” Lawless said, though he stressed the economy remains strong, as does employment.There are similar dynamics at play in Sweden. Property continued to boom through the pandemic, but that’s changed after interest rates jumped from zero to 1.75 per cent this year.
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