Housing seen as a bigger threat than China

Australia's top fund managers believe housing poses a bigger risk to the local credit market than China's economic transition.

A housing market downturn is the main threat to credit stability, according to investors. (AAP)

A housing market downturn is the main threat to credit stability in Australia, according to investors.

A survey of local fund managers by Fitch Ratings and fixed income researcher KangaNews shows they view the housing market as a bigger risk than China's transition away from heavy industry, manufacturing and exports towards consumerism and services.

"A domestic housing market downturn has replaced the prospect of a China hard landing as the main threat to Australia's credit market stability," Fitch said.

Investors said banks' exposure to the property market would be the primary risk to bank credit quality over the next year.

However respondents do not expect a crash in home prices, with only four per cent saying they would fall more than 10 per cent by 2019.

Those surveyed are managers of more than $300 billion of fixed income assets, accounting for over three quarters of the Australian domestic money market.