Brian White, joint chairman of Ray White Group, said there is pressure on Australia’s political leaders to keep the country’s AAA credit rating or face the consequences of a major housing market slowdown.

Ray White Group, which sold over $44 billion worth of property this year, is in one of the best positions to gauge the mood of the housing market.

While White said he believed growth in Australia’s house prices would remain stable, he shared some concerns over the macroeconomic prospects. “Before you take a view on where house prices will go in 2017, you must take a view on interest rates and the AAA rating,” he said. “The only element that concerns me is the potential for a downgrading of Australia's AAA credit rating.”

A credit downgrade would make some people a little more nervous about the cost of borrowing, as the debt-to-income ratio of Australian households is one of the highest in the world.

“Such an event would create an anticipation that interest rates would need to increase,” he said.

Standard & Poor’s has already placed Australia on a downgrade watch, a signal that its next move would likely be a cut to the nation’s AAA credit rating. In response, Treasurer Scott Morrison told cabinet’s powerful razor budget gang to prepare for the worst on the AAA credit rating.

On the other hand, White acknowledged that a change to Australia’s credit rating may not eventuate. “We are assured by the view – shared by many experts – that they do not anticipate a ‘re-rating’,” he said.

Australia still has plenty of firepower when it comes to improving the housing market. White said this firepower lies in the regulation of foreign investment.

“During 2016, the Australian government took a tougher line on Chinese [purchases of] Australian resale property and there remain a number of options available to the authorities to boost activity if they believe it is warranted.”
 

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