Australian property prices will get worse as a mini-credit crunch takes hold

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  • The latest quarterly Business Outlook by Deloitte Access Economics analyses a property mini-credit crunch.
  • The economists say property prices will “get worse before they get better”.
  • Deloitte also says the mini-credit crunch will sound the “death knell” for the east coast stamp duty bonanza.

Higher funding costs for the banks are helping to create a property mini-credit crunch in Australia, according to analysis by Deloitte Access Economics.

Rising global interest rates are combining with bank caution on lending, via extreme vetting of loan applications in the wake of financial services Royal Commission revelations, to generate a mini-credit crunch.

That’s putting further pressure on house prices, whose falls are gathering pace.

“Higher global funding costs are combining with a sudden tightening in credit availability from the big banks to turn the screws on credit-related sectors,” says Deloitte in its quarterly Business Outlook.

“That’s a big problem for property.”

House prices have fallen more than 16% from their peak in mid-2014 and “price falls could get worse before they get better,” says Deloitte.

And the mini-credit crunch is happening at the same time energy costs rise.

“But business confidence is generating a capex recovery and consumers, despite falling wealth, will be getting support from a nascent recovery in wages and from personal tax cuts,” it says.

“On balance, that leaves the outlook for Oz where it’s been for some time: good without being great.”

The east coast is key to growth in Australia this financial year with NSW the top performer.

“Infrastructure is still the key to current strength, but keep an eye on Australia’s mini-credit crunch: it could prove more problematic in NSW than elsewhere,” says Deloitte Access Economics.

The mini-credit crunch will also sound the “death knell” for the east coast stamp duty bonanza as activity slows in the property market.

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