On a city-by-city basis, house prices are already down in Perth and are flat in Brisbane. Sydney and Melbourne house prices have recorded extraordinary gains but with a tightening in lending rules, some increases in interest rates, outside official moves from the RBA, prices are stabilizing. Hobart and Canberra prices are buoyant, while in Adelaide, moderate gains are being registered.

Financial markets are increasing pricing in interest rate hikes over the next year or two.

Could this be exactly the wrong policy action at exactly the wrong time at least as far as housing is concerned?

What would a housing market downturn in concert with higher interest rates mean for the highly indebted consumer sector and for business?

Where to for highly geared investors or even owner-occupiers who have maximized their borrowing?

Remember that even 0.5% increase in interest rates on a $500,000 mortgage adds $2,500 a year to interest costs. That is $2,500 that will not be spent elsewhere in the economy as mortgage holders hike their repayments to cover the higher interest rates.

For the overall economy, would any weakness in consumer demand spill over consumer sentiment and spending?

There is some good news for the local economy.

World economic growth is solid especially in Australia’s major trading partners and this is underpinning robust growth in exports.

The questions into 2018 is whether this will be enough to offset the risks rapidly unfolding in the housing market,