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Australian property shares hit by Bathla collapse and rate outlook
A gauge of Australia’s listed real estate shares has fallen 15% this year, and Morningstar forecasts a 5% earnings decline in FY27.
Australian listed property stocks have begun to look structurally weaker than global peers after the collapse of private developer Bathla Group, with analysts pointing to further rate-hike risk and deteriorating housing conditions as key headwinds. LiveMint Markets, citing Bloomberg, reported that a gauge of Australia’s real estate shares is down 15% this year, versus a 7% gain for developed markets real estate stocks, leaving the sector on track for its worst relative year since 2010. The pressure is coming from tighter financial conditions, including higher borrowing costs that squeeze margins and slow development activity. The source also noted that weaker home sales are weighing on earnings, while additional factors including possible property tax changes and a prolonged housing downturn could extend the strain across the sector. Morningstar analyst Yingqi Tan said conditions are unlikely to improve quickly, adding that the firm does not expect FY27 to be “glorious.” According to the report, Morningstar forecasts a 5% decline in earnings for FY27 as hawkish policy and higher rates remain a major drag on both commercial and residential property managers. Australia’s central bank has delivered three consecutive rate hikes this year to curb inflation, and swaps are fully pricing another increase in November, with about a 90% chance of an additional hike by mid-2027. The report highlighted that firms including Dexus and BWP Property Group have flagged higher borrowing costs, and that Centuria Capital Group slid more than 10% in late August after Bathla entered insolvency, while some larger developers such as Stockland and Mirvac may find opportunities as fewer homes get delivered.