Citi Research suggest that Australian property market prices are at risk of falling more than 10 percent this year.
“Among the roughly 60 economies under coverage, only 11 are at significant risk of notable home price falls over the next 12 months, and only one — Australia — might experience year-on-year declines exceeding 10%,” Citi says.
Citi says the downturn underway has been caused by several factors, nominating the impact of tighter macro-prudential lending standards, reduced foreign buyer activity and a steep increase in new housing supply.
“Where prices have been rising rapidly for several years, including in Australia, authorities have deployed a range of macro-prudential policies to slow credit growth… which have helped to cool the housing market,” it says.
It added that foreign demand has also declined due to restrictions of China’s capital outflows and tax changes on foreign investment in residential markets.
Citi says the impact on broader economy could be larger given that Australia has an outsized share of the property market. Lower oil prices, China’s economy losing momentum effects countries like Australia.
Just how far the housing prices drop would be remains a point of discussion.