The main four Australian banks have been warned by the International Monetary Fund to make sure they have sufficient cash reserves to cover any potential downturn in the housing market.
The IMF is worried that the Australian housing market may be overheated and that prices in cities are artificially inflated due to a number of wealthy overseas property investors from China entering the market.
Around 80% of the mortgage market is shared between just four domestic banks which are Westpac, NAB, ANZ and the Commonwealth Bank.
According to the IMF report, combining any corporate losses due to the global financial crisis with possible mortgage defaults could put too much pressure on Australian banks.
The situation isn't helped by economists at ANZ, who are already predicting government cuts will shave around a half percentage point off economic growth for the next four years.
US analyst Jordan Wirsz has already warned that house prices in Australia could slip by as much as 60%, although most would think that is quite an extreme prediction, and the latest report from Australian Property Monitors may yet prove it to be wrong.
After five consecutive quarterly falls, property prices have risen nationally for the first time since September 2010. Melbourne saw the greatest house price growth with prices rising by 1.1%, while in Sydney property prices remained the same. Melbourne is now ranked as one of the world's most costly cities in which to buy property, and is more expensive than London, New York and Los Angeles.
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