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Is the 'lucky country' headed for gloomy times?

A man uses umberalla to during rain in front of the Sydney's iconic landmark Harbour Bridge on June 25, 2013
Saeed Khan | Getty Images
A man uses umberalla to during rain in front of the Sydney's iconic landmark Harbour Bridge on June 25, 2013

Sentiment in the so-called 'lucky country' has deteriorated sharply, analysts told CNBC.

Australia's stock market has fallen 8 percent since the start of September, weighed by concerns over global economic growth, steep declines in commodity prices and the state of Australia's property market.

"Investor sentiment has certainly collapsed across a range of measures," Shane Oliver, head of investment strategy at AMP Capital, told CNBC.

Investors are much more concerned about the prospect of a market downturn and the state of Australia's housing market than they were in the second quarter of this year, a survey of fixed income investors by Fitch Ratings showed on Wednesday.

Read MoreBuckle-up: Global stocks in for long roller coaster ride

79 percent of respondents flagged a downturn as a high or moderate risk, up from 43 percent in Fitch's second quarter survey. The frothy housing market was high on respondents' worry list; 53 percent expect house prices to rise by 2 to 10 percent in 2015.

"The concerns demonstrated in the Fitch Ratings survey are very clearly the case," said Evan Lucas, market strategist at IG. "Housing is a major part of Australia confidence, [so] any issues around housing and wages are going to see sentiment fall."

Red hot property

Australian dwelling values rose 9.3 percent over the 12 months to September, spurred by a record 15-month run of historically low interest rates. Values in Sydney and Melbourne rose 14.3 percent and 8.1 percent, respectively, over that period, RP Data figures show.

And in recent months, the Reserve Bank of Australia warned of regulatory steps to rein in loans to investors.

Read MoreAustralia's economy: from mining to building

IG's Lucas highlighted results from the recent Westpac-Melbourne Institute consumer sentiment report, in which the number of pessimists has outweighed optimists for eight straight months, although confidence picked up slightly in October.

Furthermore, business conditions fell in September, according to the National Australia Bank's monthly business survey, bringing the index to its lowest level in 4 months.

"The reasoning according to Westpac is the heat in the property market and the lack of growth in wages. This has caused fears of a property slide, while there is also a suggestion that rates will rise in the next year or so," Lucas said.

Respondents in Fitch's survey were more optimistic on macro indicators, however. 79 percent said they don't expect the mid-point unemployment rate to exceed 6.5 percent between now and 2016.

Concerns about the nation's rising jobless rate have grown after it jumped to 6.4 percent in July, before falling to 6.1 percent in September.

Read MoreConfusion aside, Australian job market still soft

Silver lining

The deterioration in investor sentiment could be an opportunity, AMP Capital's Oliver said.

"The collapse in investor confidence - both globally and Australia - is a sign that we may be at or close to a low in stock markets," he said. "It's actually a positive sign, as what the crowd is doing is a good contrarian indicator to what an investor should do."