Australia to lead world in property price slump

AUSTRALIA is tipped to lead the world in house price falls this year, a new analysis by a leading investment bank has warned.

The report by Citi found Australia was the only major economy which risked suffering a drop in property prices of more than 10 per cent in 2019.

The analysis covered 60 major economies ranging from the US, UK and Canada to China, India and Turkey.

Nations comprising roughly one-third of global gross domestic product (GDP) had a “significant risk” of experiencing a fall in house prices this year, Citi found.

Economies likely to experience house price falls include Australia, Canada, China, Czech Republic, Hong Kong, New Zealand, South Korea, Sweden, Switzerland, Thailand and the UK. But only Australia risked notching up a fall greater than 10 per cent, Citi said. The likelihood of such a drop was rated as greater than 50 per cent.

“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 per cent,” Citi said.

“We estimate a drag of 0.2 percentage point from global real GDP growth if prices in all 11 economies were to fall.”

Citi warned Australian homeowners and property investors are among the most at risk globally from rising interest rates given the nation’s high debt to income levels.

But it noted Australia was one of the few nations to have property prices above what they were before the global financial crisis hit.

Fitch Ratings said it was pencilling in a 5 per cent drop in Australia prices for 2019.