Australia’s housing market in trouble, report claims

Adam Smith 6 September 2016

housing bubbleAn investment house has claimed Australia’s housing market is heading for a correction.

A study by CLSA has claimed Australia’s housing market is headed for a downward trend, Business Insider has reported.

“We believe the housing cycle has peaked and that new construction will decline over the next two years,” the study said.

CLSA claimed some apartments may struggle to reach “reasonable levels of settlement” over the next few years, sending smaller private developers into receivership.

Settlement fears for apartments

“This will expand into surrounding apartment buildings. While we believe that there will be limited settlement risk on high quality flats, it will result in a sharp slowdown in new apartment developments,” the investment firm said.

While the firm forecast defaults for small developers and a “sharp contraction” for apartment construction, it said this was unlikely to lead to sharp price declines for other regions, Business Insider reported.

“Our worst-case scenario would result in dwelling prices falling sharply in all areas, eventually leading to a recession.”

CLSA said tightened restrictions on investment lending could be the catalyst for the downturn.

“Regulations, enforcement and fees have increased and the free flow of capital from China has been curtailed,” CLSA said.

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