The Australian apartment recession report analyst CLSA (Credit Lyonnais Securities Asia) has issued a warning that the oversupply of apartments will trigger a crash in prices leading to a possible Australian recession effecting the entire housing market. The Australian apartment recession report highlighted issues of affordability and individual debt is overextending Australia’s real estate bubble, which is being held aloft by foreign capital”. The shift by big banks to tighten lending standards is likely to cause a "correction" and "crisis" in cheap apartments which will spread, leading to defaults among smaller developers and a sharp contraction in construction, CLSA says.
A "correction" in the apartment market could see sharp falls in all Australian home prices and a nationwide recession, a gloomy bank analyst report on the housing market warns. The report by analysts CLSA paints a "base case" scenario which says Australia's housing cycle has "peaked," with household debt now extending the country's property bubble. The shift by big banks to tighten lending standards is likely to cause a "correction" and "crisis" in cheap apartments which will spread, leading to defaults among smaller developers and a sharp contraction in construction, CLSA says. The "worst case" scenario foresees "dwelling prices falling sharply in all areas, eventually leading to a recession," the report's authors, a respected former banking analyst Brian Johnson, and his colleagues Andrew Johnston, David Murphy, Sholto Maconochie, Chris Kightley and Ed Henning say.
AUSTRALIA’S housing cycle has “peaked” and new construction will decline over the next two years, with a crash in prices leading to a possible recession, a new report has warned. In a note on Friday, investment firm Credit Lyonnais Securities Asia (CLSA) said issues of affordability and household debt were “overextending Australia’s real estate bubble, which is being held aloft by foreign capital”. With tightening bank lending standards the likely catalyst for a correction, CLSA’s base case is for the “crisis” to start with cheap apartments and later spread to other flats in proximity. “This is likely to lead to defaults among small developers and a sharp contraction in apartment construction,” CLSA said. “However, it is unlikely to result in sharp price declines in other regions. Our worst-case scenario would result in dwelling prices falling sharply in all areas, eventually leading to a recession.
As investors increasingly probe companies’ exposure to the apartment glut, broker CLSA warned clients there was $16 billion of excess apartments in Melbourne and Brisbane at risk of failing to settle in the next two years as banks turn their back on the space and less capital pours in from China. The warning came as mid-tier lender ING Direct quietly lifted variable interest rates for new owner-occupier customers by seven basis points, taking back some of the 12-basis-point reduction in the wake of last month’s Reserve Bank rate cut to a record low. CLSA’s team of six analysts, including banking expert Brian Johnson, claimed the “crisis” would start with cheap apartments before spreading to other flats, forcing small developers to the wall and apartment “fire sales” by receivers.