There is a non-zero possibility that, within the next 3-12 months, the international credit crunch will hit Australia. If so, the consequences could be:

For banks and other lenders:

  1. They are unable to roll over their debt facilities, or the terms are much worse.
  2. Some fail or are bailed out, and the entire sector becomes a disaster area.
  3. Survivors cut their dividends, and share prices dive.
  4. They sharply revise their lending criteria, demanding higher security and better borrowers.
  5. They discount housing valuations, lending smaller amounts than previously.

The consequences for real estate would be:

  1. Purchasers would need to be highly creditworthy. Many would be refused.
  2. Purchasers would have to put up a minimum of 20% cash deposit, with no second mortgages or mortgage insurance.
  3. In combination with discounted valuations, purchasers would find difficulty in borrowing more than 60-70% at current valuations.

And the final result:

  1. A sharp correction in the housing market, of at least 20%.
  2. A lot of foreclosures and bankruptcies.
  3. A lot of wealth evaporated into thin air.

Anyone affected by that scenario?