Property slowdown to be short and shallow, not sharp: Vangaurd

One of the world's largest fund management groups has disputed suggestions about a collapse of the Australian residential property market.

Vanguard, which has $7 trillion under management globally, claims slowing residential property market is unlikely to turn into a sharp downturn that could derail economic growth. 

Vanguard says there is only a low risk of a sharp correction.

The US funds house conducted an in-depth analysis of four of the world’s largest and most developed housing markets.

It found that Australia and Canada stood out because of their high cost of housing and high levels of household debt, even compared to the US and Britain.

The house price to income ratio in Australia for the quartile is the highest ever, while household debt to GDP is ­approaching an all-time high of 122%.

Vanguard determined that Australia’s housing market rally had “exceeded expectations” ­beyond traditional measures of housing demand versus supply, interest rates and foreign investment.

However, the fund manager’s economists considered there was a low risk of falls causing a ­recession in all markets studied, including Australia.

“A big unknown is how households deal with their high debt given the slow income growth in Australia, however, and this will be a large factor in what transpires in Australia’s housing market,” Vanguard economist Matthew Tufano said.

“However, the large pipeline of housing — mostly apartments — coming into the market in Australia could effect a more gradual moderation in house prices, rather than a sharp ­correction.”