This report does not constitute a rating action. The year 2026 has been tough for Australia's property sector. We think the malaise will continue into early 2027. But our analysis shows most sectors have the capital and other buffers within the ratings to handle a severe downside scenario. House prices are declining due to stretched affordability stemming from: Four 25 basis-point (bps) increases in central bank interest rates between February and September 2026; and Negative sentiment from tax policy changes announced in the May 2026 federal budget. We estimate average residential property prices will fall by at least 5% for the calendar year ending Dec. 31, 2026. We expect the weakness could persist in the first half of 2027 before
