Chinese economy a 'key risk' to Australian housing

In its Statement of Monetary Policy on Friday, the RBA said the condition of the Chinese property market has been a source of uncertainty for some time.

“The Chinese authorities had earlier been trying to engineer a slowing in the growth of property prices,” the RBA said.

“Now that the market has turned down, some restrictions on purchasing have been removed in most cities and the authorities have acted to provide some support to purchasers and developers,” it said.

“It is too early to know how effective these efforts will be or what implications the slowing in the Chinese property market may have for Chinese commodity demand, economic activity or financial stability.”

Figures from the country’s National Bureau of Statistics show residential sales fell 10.8 per cent in the first nine months of the year.

The prudential regulator views China as a trigger that could potentially lead do dramatic falls in the Australian property market.

On Friday, APRA released the results of its stress test of 13 Australian banks.

The scenario included a housing market double-dip, prompted by a sharp slowdown in China.

“In this scenario, Australian GDP growth declines to -4 per cent and then struggles to return to positive territory for a couple of years, unemployment increases to over 13 per cent and house prices fall by almost 40 per cent,” APRA chairman Wayne Byres said.

Speaking to Mortgage Business, AMP Capital chief economist Shane Oliver said there is no doubt that the performance of China’s property market is a risk to Australian house prices.

“If I think back over the years that I have been monitoring the Australian housing market and worried that it is expensive and therefore vulnerable, one of the triggers I always had for a potential collapse was a collapse in the Chinese economy,” Mr Oliver said.

“An obvious trigger to that would be a property collapse in China,” he said.

“So it is certainly a risk and probably one of the bigger risks around at the moment.”