OECD sounds warning on falling house prices in Australia

Australia’s regulators have been warned to prepare “contingency plans for a severe collapse in the housing market” that could lead to a “crisis situation” in one or more financial institutions.

Australia's housing market is on track for a soft landing, the OECD says. (AAP) Source: AAP

The Organisation for Economic Co-operation and Development’s (OECD) latest in-depth assessment of Australia maintains that while the “current trajectory” of house price declines “would suggest a soft landing … some risk of a hard landing remains”.

In its latest survey on Australia, the organisation pointed to the possibility of a "significant correction" in the housing market that might result in "financial institution insolvency".

While the OECD argues a "direct hit" from mortgage defaults is unlikely, the report said a dive in consumer confidence as a result of declining personal wealth would hurt the overall economy.

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