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Economics

Australia’s Slumping Property Market Raises Risk of a Recession

  • Households’ record debt-to-income ratio squeezed by rate hikes
  • Major risk is fallout on consumption that makes up 60% of GDP
Newly built houses in a suburb of Sydney, Australia.

Newly built houses in a suburb of Sydney, Australia.

Photographer: Brendon Thorne/Bloomberg

Australia’s rapid-fire interest-rate increases are sending tremors through the nation’s heavily indebted households and threatening a property downturn on a scale unseen since the eve of the 1991 recession.

The market hardest hit is bellwether Sydney, where home values have dropped almost 5% in the past three months, compared with 2% in the A$9.9 trillion ($6.8 trillion) national market. Further falls are inevitable as the Reserve Bank, which meets again in just under two weeks, raises borrowing costs at the fastest pace in a generation.