Australian homeowners have nine months to prepare themselves for higher interest rates and tighter lending restrictions, according to ANZ economists, who say Canada’s approach to a similar property market could be seen as a roadmap.

Vancouver and Toronto are often likened to Sydney and Melbourne, with post-GFC low interest rates sparking huge house price booms. And as financial screws are now being tightened in both countries, Canada’s experience should be closely watched by Australia, economists say.

Put simply, Canada’s housing market is simultaneously facing the hurdles of higher interest rates and tighter lending regulations, causing soaring prices to ease.

Australia, meanwhile, is already seeing house prices slip and investors retreat following tighter lending practices, and have two rate hikes to look forward to. It could get ugly.

“Canada is arguably ahead of Australia in its economic and policy cycles, so watching developments there can be useful for those monitoring the Australian economy,” according to ANZ economists David Wilson and Jo Masters, who note house price growth in Canada has halved in the last year.

“Canada is nine months ahead in terms of monetary tightening,” Mr Masters told Domain, pointing to two recent interest rate hikes in Canada, and ANZ’s prediction that the Reserve Bank of Australia will hike twice in 2018.

“Canada recently released additional macro-prudential measures for the property sector. These are likely to have a material impact on mortgage originations, housing affordability and property price growth in 2018. The hottest property markets in Canada – Vancouver and Toronto – are likely to be hit the hardest by these measures.”

Canadian interest rates have come off a lower base than Australia, with hikes in July and September only taking the official cash rate to 1 per cent – noticeably below Australia’s 1.5 per cent.

AMP Capital’s Shane Oliver agreed Australians should be watching as Canada’s plan unfolds, but said a rate rise and possible housing market slowdown was more likely 12 months out.

“It’s a fair comparison to make, both countries have had strong immigration levels and pretty strong property markets, which have lead to a deterioration of affordability,” he said.

Dr Oliver said any rate rise in Australia may take some of the heat out of the Melbourne and Sydney housing markets, but would put pain into some of the other state capitals such as Adelaide and Perth.

“Australia’s complicated. It’s impossible to talk about a property boom in Perth or Adelaide,” he said.

Australia’s lopsided property boom had already started to head south in Sydney due to tighter lending to investors, Dr Oliver told Domain, but remained strong in Melbourne thanks to booming population growth.

“If we go down the Canadian path we will risk a steeper decline,” he said. “The RBA doesn’t want to crash the property market, the housing market is too big too fail.”

He said, ideally, house price growth would slow enough to allow wages to catch up, although admitting some criticise the idea as a “goldilocks scenario”.

But, considering investors have already started fleeing the property market, and house prices are easing, rate hikes in Australia may cause more pain than in Canada.

ANZ’s report indicated the rate hikes had already translated into a drop off in people buying household-related items.

The fear is the same may be in store for Australia and with housing and construction as one of the biggest employers in the country any downturn there could have knock-on effects all around this wide brown land.

“With household debt sitting at record highs, the RBA faces uncertainty about how consumer spending will respond to slowing house-price growth,” ANZ said.