Australia also has a place in the world`s four riskiest real estate markets, according to (Oxford Economics), the Oxford Institute for Economics, and the prospect of falling house prices is more likely to pose a threat to economic activity.
The four housing markets, Sweden, Australia, Canada and Hong Kong, are "particularly dangerous", according to Oxford. Oxford compared a range of risk factors, including home valuations compared to long-term averages.
Adam, chief economist, Oxford? Slater (Adam Slater) wrote in a research note: "of these four indicators, valuations are high, the real estate market continues to boom, debt levels are high, and floating-rate debt is a large proportion."
Risks are "relatively limited" in major markets such as the United States, Germany, France, China and Japan.
According to Oxford, the OECD`s median home price is below its peak in 2006 / 07, but is higher in some riskier markets.
"Historical experience has shown that high valuations-125 percent or more of the long-term average-suggest that house prices are likely to fall 60 percent over the next five years," Slater wrote. "this is important because house prices can have a significant impact on economic activity, even if the G7 relationship may be relaxed in recent years."
"across a range of housing risk indicators, the risks in the real estate market appear to be concentrated in smaller advanced economies and less serious for the largest."
In a long-term average of 100, property in Australia is 160, compared with 165 in Sweden, 173 in Canada, and 203 in Hong Kong
Sydney`s home price fell more than any other city by 5.6 percent in the year to August, according to CoreLogic. Melbourne`s house prices have fallen 1.7% this year. Nationwide, house prices fell by 2%.
Oxford noted that in most economies, mortgage rates have not risen significantly in the recent past, and even have fallen in some markets.
"as a result, the classic" trigger factor "for falling house prices is largely non-existent," Slater wrote. "
"however, rising interest rates are not necessary for prices to start falling (as Sweden has already shown), with high valuations and high liabilities, Even modest increases in interest rates, such as Canada and Hong Kong, may be a problem. "
In Oxford`s estimate, house prices in Australia actually rose 0.3% last year.
But another risk factor in Australia`s housing market is high, with 82 percent of its mortgages at floating rates.
Oxford warned that the rise in global house prices would put local house prices under pressure and could have a negative impact on economic growth. This month, official figures show that Australia`s economy is growing at its fastest pace since 2012.
In the 12 months to June, GDP grew 3.4%. Housing construction activity provided solid support, with residential investment growing 1.7 percent in the quarter and 3.8 percent year-on-year.
But economists warn that peak building approval and falling house prices suggest that the industry`s boost to growth will weaken in the coming quarters.
But last month, RBA Governor Roy (Phil Lowe) expressed concern that house price growth had outpaced income growth for quite a long time before the recent fall, and that credit had also risen sharply.
He said in August: "I think we do need a moderate adjustment or fall in house prices over a period of time," he said in August.
