The economic slowdown is turning nasty as homebuyers are under intense pressure. Due to the gloom and doom of the global economy economists warn things could get even worse.
As stated by Shane Oliver Amp's chief economist "We are closer to a tipping point, if not already past it."
The economy seems like it will be in for a hard landing and the possibility exists that we will be heading for a recession.
The RBA may very well need to cut interest rates as early as next year, as consumer spending is in danger of coming to a standstill.
Potential homebuyers were running scared even before Bank West and St. George's decided to raise their interest rates and be replicated by other lenders.
Households are grappling with the 7.25%; food price inflation and high fuel prices- are slowing down the property market and curbing spending.
According to the Australian Bureau of Statistics new home loan approvals have plummeted by 25% since February. This is the biggest fall in over 30 years according to home -loan finance records.
According to ABS data home loan approvals hit a two-year low of $18.1 million in May- down from last June's peak of $24.3 million.
Despite banks lifting their rates independently of the Reserve Bank, economist are quietly confident that the RBA has ended its rate rising cycle.
Even though families may be reluctant to borrow money to buy a new house the value of properties is expected to stay high in the medium term, as rented properties remain in short supply, amid a population explosion.
Due to the collapse of sub-prime mortgage in the US, the housing market has been battered across the globe.
Even though the US activity and prices have been in spectacular free fall for the past two years, the effect on Australia's property market seems to have been somewhat milder.