Housing market is the single biggest risk to economy: Magellan chief

The Australian economy’s “single biggest risk” is the housing market and any pullback by Chinese property investors could trigger a crisis, according to a top executive of a global fund manager.

Banks and the stock market would be hit the hardest in case of a housing downturn, said Magellan Financial Group CEO Hamish Douglass, who manages the group’s $9 billion global fund.

“The reason the economy has been so strong is because of the massive residential construction boom, and it’s been very supported by Chinese investors,” Douglass was quoted by The Australian. 

The role of Chinese investors was highlighted by commentator Robert Gottliebsen, who recently said that Sydney has averted a crisis of defaulting off the plan Chinese apartment buyers because of the lending role of property developer Harry Triguboff.

A “major correction” in house prices would leave banks exposed, as much of their income is derived from housing mortgages, and also hammer the stock market.

“I see that as the major risk to the economy and to large components of the market. And it is correlated to the Chinese investor in our market,” he said.

Magellan aired his views on the housing market risk during the fund’s result announcement.