In his weekly update, AMP Capital’s chief economist Shane Oliver said “very expensive housing” and high levels of household debt does make the Australian housing market vulnerable.
He also noted that mining towns such as Karatha are seeing significant price drops, with fears surfacing that other cities will soon follow.
However, Mr Oliver stressed these factors alone are not sufficient reasons to validate housing market “crash calls”.
To see an actual property crash of 20 per cent or more, Australia would likely need to experience a recession, a surge in interest rates or a property oversupply, Mr Oliver said.
“Our view since around 2003 has been that overvaluation and high levels of household debt leave the housing market vulnerable. As such it could be seen as Australia’s Achilles' heel. However, in the absence of a trigger, it’s been hard to see a property crash as a base case. Not much has really changed."
Mr Oliver said that while price growth in recent boom markets such as Sydney and Melbourne markets is slowing, house price growth is likely to remain positive this year.
Price growth is likely to remain negative in Perth and Darwin. Hobart and Adelaide are likely to see continued moderate property growth, while Brisbane may “pick up a bit”, he said.