A hefty sell-off of Australian shares on Monday is being fuelled by a deterioration in the housing market, according to managing director of Market Economics, Stephen Koukoulas.
The ASX 200 index closed down 2.1 per cent on Monday, led by banks and mining stocks, with speculation that the index could dip below 5000 before the end of the week.
New auction data from RP Data showed Sydney and Melbourne clearance rates at 73 per cent, but only 52 per cent in Brisbane and 57 per cent in Canberra.
The combined capitals clearance rate was 70.7 per cent, and has been trending down since the beginning of 2015.
Mr Koukoulas said: “Prices are off 5 per cent in Perth. In Sydney and Melbourne prices are holding up, but it takes a while for lower clearance rates to filter through to prices.
“The banks are being hit by cooling demand from buyers, but also higher capital requirements imposed by APRA.”
Macrobusiness analyst Chris Becker wrote on Monday: “The key level to watch is not just 5000 points on the ASX200 but the 6400 point level on the financials index … A breakthrough there and this correction will spill over into full bear market territory.”
The ASX financials index was down 3 per cent at lunchtime at 6675 points.