House price slowdown won’t lead to crash: HSBC
House prices may slow over the year ahead, but borrowers should avoid a debt crisis, a new report has claimed.
A new paper from HSBC has forecast house price growth to remain slow into next year, The Sydney Morning Herald has reported. HSBC economist Paul Bloxham produced house price growth to run at low single-digit rates for the remained of the year and into 2017.
While the slowdown in house price growth could “raise questions about the sustainability of household debt”, Bloxham said, he claimed it was unlikely households would run into a debt crisis.
“The overall risks appear to be manageable, given low interest rates, solid jobs growth, a favourable distribution of debt and tightened lending standards in recent years,” he said.
According to the SMH, Bloxham said the high level of household debt in Australia would not be a problem so long as households could afford to service it.
"In Australia, the distribution is fairly favourable, with high income earners holding most of the debt. Overall, we see mortgage debt as generally well distributed to households that can afford to continue to service it and see the financial stability risks as moderate,” he said.
While Bloxham said Australia would avoid a housing meltdown as a result of slowing price growth, he did warn that apartment over-supply created a risk.
"The risk of a potential over-supply of apartments is largest in Melbourne and Brisbane, where apartment building has been at record highs as a share of the existing stock. There is also some risk of over-supply in Perth, where apartment building has been strong."