Property slump 'the biggest threat to major banks'

A dip in property prices is the biggest threat to major banks in Australia, the Organisation for Economic Co-operation and Development has warned.

Deputy director of financial and enterprise affairs at the body Adrian Blundell-Wignall explained a sharper slowdown in Chinese economic growth would have a knock-on effect on employment in Australia, the Australian reports.

This would result in house prices falling as fewer people sought to take out mortgages or home loans to purchase a property.

Some of the country's biggest banks – Commonwealth Bank of Australia, National Astralia Bank, ANZ and Westpac – have substantial exposure to the mortgage market and could therefore be destabilised by a property crash, Mr Blundell-Wignall said.

"If you don't have your job, you just can't pay (your mortgage) and then you become a bad loan problem," he remarked.

The Housing Industry Association has called on the government to take action in the property market after warning the outlook for this year is bleak. It expects the number of new housing developments starting in 2012 to fall by 11.5 per cent.

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