Tim Church, head of Morgan Stanley’s Australia investment banking, said at an
Australian Financial Review property summit that the insolvency of Sydney
residential developer Bathla will have material economic effects and could curb
consumer spending as house prices fall. Bathla is negotiating with creditors
after becoming insolvent amid slowing sales and rising construction and
financing costs; it had borrowed heavily from the private credit market. The
country’s securities regulator last week called the situation extremely complex.
Church said there is no doubt this exposes cracks in private credit and does not
look like good capital management; he expects Australian house prices to fall
roughly 15% peak-to-trough.
