Moody's Analytics researchers have warned that any rebound in Australian property prices risks loading households up with unsustainable levels of debt.
The analysts said in a report published on Monday that they expected the sharp drop in home values across the country - which started in mid-2017 - to hit its lowest level in the third quarter of this year.
Tighter bank lending standards had helped cause the decline in real estate prices, the report said, with the Australian Prudential Regulation Authority's easing of restrictions in May as well as cuts to interest rates by the Reserve Bank of Australia potentially stemming further losses.
But the reported noted that "Australia's households are amongst the highest leveraged in the developed world" and any prospect of prices broadly increasing "gradually" in the December quarter posed a risk.
"This could see the household leverage-to-GDP ratio climb, making Australia stand out further amongst its peers," Moody's Analytics economist Katrina Ell said.
"This is an undesirable position to be in, particularly given the questions around sustainability of the potentially rising debt load."
