Aussies have some of the world's highest debt levels, and property prices are finally cooling. But investors fearing a U.S-style credit crisis needn't worry, according to a new report from HSBC.
As Canberra reoriented economic growth away from mining and towards services, a housing construction boom began, leading to a 30 percent increase in home prices since mid-2012 and making Australia one of the world's least affordable property markets. As a result, the household debt-to-income ratio jumped from 167 percent in 2011 to 186 percent in 2015, HSBC said.
"This makes Australian household debt levels amongst the highest in the developed world."
The rise in home prices slightly softened the household debt-to-asset ratio, which fell from 24 percent in 2011 to 22 percent in 2015. But as the market beings to cool, that raises questions about the sustainability of household debt, the bank said.
National housing prices have been steady over the past six months, with the slowdown most reflected in major cities. In Sydney and Melbourne, prices have been flat since October, following annual average growth of 10 and 6 percent respectively, over the previous four years, HSBC noted.