The housing market in Australia is undergoing a correction, in a slowdown which has predominantly hit the investor market and interest-only mortgages.
House prices are falling in regions where there is a high proportion of investors, while the owner-occupied segment of the housing market is holding up relatively well.
However, the risks on this front are growing. “Even if we do see some further slowing, we think that given the broader dynamics of strong employment, low interest rates, high population growth, this is not a question of housing driving Australia into a recession,” said Been.
Participants at the event also heard debt issued by Australian companies and financials has held up relatively well amid the volatility in emerging markets. “We’ve had a year of outperformance; we’ve seen Australian credit get upgraded almost three to one times by the rating agencies,” said Owen Gallimore, head of credit strategy and research.
“Bond performance has been stable and stoic against the volatility we see coming out of China,” he said.
Non-investment grade borrowers have bore the brunt of volatility, having to pay double-digit interest rates to get one to two year funding, according to Gallimore.
“But there are high cash balances into year-end and a very heavy debt redemption calendar of US$150 billion next year. There is a lot of cash to be put to use and reinvested,” he said.
Aussie Day is a roadshow in Asia to connect Australian issuers with a diverse base of Asian investors. This year’s event held in Hong Kong, Tokyo and Seoul saw 10 Australian borrowers meet 170 investors through half-day seminars and one-on-one meetings.