Australian House Price Slump Could Deepen, AMP Economist Says

what happened

According to Cotality, reported by Market Talk, average home prices in Australia fell 1.2% from September in October. It was the seventh consecutive monthly decline. Prices in capital cities dropped 1.4%, and earlier months were revised to show steeper losses.

AMP chief economist Shane Oliver now expects a 15% top-to-bottom fall, up from his earlier forecast of 10-15%. He says the pace of the decline is the fastest since 1980. Higher-than-expected interest rate hikes, rising unemployment and tax increases on property investors will keep pushing prices lower.

why it matters

For markets, this points to weak domestic demand in Australia and a risk for banks that lend heavily into mortgages. The outlook comes from one economist, so it should be read as an estimate rather than a settled fact.

market impact

Australian banks: falling prices and rising unemployment raise mortgage risks, pressuring the sector

• ▼Australian banks pressure down — higher mortgage risk as prices fall and unemployment rises

tags

instruments