PHOTO: CBA’s base-case is for house prices to fall 11 per cent, but its worst case scenario is a 32 per cent crash.(ABC News: Ian Cutmore)
Australia’s biggest home lender is warning Australian house prices could tumble by a third if coronavirus leads to a “prolonged downturn” and extended period of high unemployment.
Key points:
- CBA announces an unaudited profit of $1.3b for the first three months of 2020
- The bank is setting aside $1.5b for potential coronavirus-related losses, bringing total credit provisions to $6.4b
- CBA says it has received 144,000 requests for home loan repayment deferrals and 71,000 for business loans
In its third-quarter trading update, CBA announced it had set aside $1.5 billion to cover potential losses from the COVID-19 recession, taking its total provisions for bad and doubtful debts to $6.4 billion, which it said was higher than its three main rivals.
Those provisions are based on the bank’s base case of a 6 per cent economic downturn this year followed by a rapid bounce-back of 6 per cent next year and further 3 per cent growth in 2022.
Unemployment would average 8.25 per cent this year before easing back to 6.5 per cent by 2022.
In this scenario, home prices would fall by 11 per cent over three years.
However, the bank also flagged a “prolonged downturn” scenario, where GDP growth falls 7.1 per cent this year, followed by a further 0.8 per cent decline next year, before a modest 2.3 per cent recovery in 2022.
READ MORE VIA ABC NEWS
