Price slump in Australian homes could hurt economy

Household consumption could suffer amidst stricter lending standards.

Bloomberg reported that Australian home prices sank for 12 straight months amidst tighter lending rules and stretched affordabilities.

The price slump has triggered the possibility of debt downgrades for the country’s big banks, a study by Pacific Investment Management Co. (PIMCO) found.

“We have grown more cautious with the external credits of Australian banks,’’ according to a note to clients from Pimco. “The probability of a market-moving agency downgrade that causes major banks to lose their AA- rating for the first time in history is now higher than before.’’

Moreover, household consumption could bear the brunt of tighter credit and the slower housing market, PIMCO said.

Data from the International Monetary Fund (IMF) revealed that more than 60% of bank loans in Australia are in residential properties, making it the highest proportion in developed countries and more than double compared to the US.

Here’s more from Bloomberg.
 

Join Singapore Business Review community
Since you're here...

...there are many ways you can work with us to advertise your company and connect to your customers. Our team can help you dight and create an advertising campaign, in print and digital, on this website and in print magazine.

We can also organize a real life or digital event for you and find thought leader speakers as well as industry leaders, who could be your potential partners, to join the event. We also run some awards programmes which give you an opportunity to be recognized for your achievements during the year and you can join this as a participant or a sponsor.

Let us help you drive your business forward with a good partnership!