OECD warns of dramatic end to housing boom

OECD warns of dramatic end to housing boom
OECD warns of dramatic end to housing boom

Australia was potentially on the cusp of a "dramatic and destabilising" end to the housing boom because of the apartments building boom, the Organisation for Economic Co-operation and Development has suggested.

In its latest assessment of the threats to the economy, the Paris-based think tank went into few details, but added jitters over the federal election policy are adding to risks.

Analysis of the OECD's latest report by the Australian Financial Review commented that the OECD had paradoxically simultaneously noted that risks of a property boom appeared to be receding which provided leeway for even more official interest rate cuts.

"Domestically, the unwinding of housing market tensions to date may presage dramatic and destabilising developments, rather than herald a soft landing," it said.

The warning is accompanied by graphs showing dwelling approvals retreating from a peak and house prices levelling out. 

Australia’s entire economy was vulnerable to the continued commodity price plunge too, the OECD warned.

Suggesting that the strong economic growth of the first three months of the year will not be maintained, the OECD forecast growth for Australia of 2.6 per cent this year, down from the 3.1 per cent over the year to March.

“Australia’s exposure to commodity-market developments, par­ticularly those linked to the Chinese economy, remains an important source of uncertainty and risk,” the OECD says in its latest economic outlook.

“The unwinding of tensions in the housing market to date may presage dramatic and destabilising developments, rather than herald a soft landing,” it advised.

The OECD's two-page analysis calls for “close vigilance” of the heavily leveraged housing market and suggests Labor’s negative gearing proposal had created uncertainty.

Jonathan Chancellor

Jonathan Chancellor

Jonathan Chancellor is one of our authors. Jonathan has been writing about property since the early 1980s and is editor-at-large of Property Observer.

Tags: 
Housing Boom Housing Bubble

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