Recession could lead to house price falls

Analysts in Australia have warned that if the economy is shaken by global economic turmoil and enters recession, house prices across the country could plummet – bad news for those who have already managed to secure low interest home loans.

The Reserve Bank of Australia (RBA) recently held interest rates so that economic recovery was not stymied, but it is possible that a rate rise is on the horizon considering the current inflation situation.

Speaking to Market Watch, Shane Oliver, head of investment strategy and chief economist at AMP Capital Investors, said: "There are concerns that if the Australian economy goes into recession, then Australian house prices are going to go the way of European and US house prices – ie down."

Recently, the head of the International Monetary Fund's staff mission to Australia claimed that house prices in Australia are currently too high and that the RBA would have no choice but to boost interest rates soon.

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