Morgan Stanley's investment banking chief in Australia, Tim Church, labeled the collapse of Bathla Group as a "hammer blow" to the economy at the Australian Financial Review Property Summit in Sydney. Church warned the knock-on effects will be significant as sliding house prices curb consumer spending. Sydney residential developer Bathla is in talks with creditors to secure funding after falling into insolvency.

The company contended with a slowdown in sales amid a real estate slump while construction and funding costs increased. Bathla has borrowed heavily in the private credit market, which Church says is showing cracks and does not look like good custodians of capital. Data showed nearly 1,500 homes across Australia's major cities were taken to auction, a 31% decline from last year.

Bloomberg Economics economist James Mc Intyre expects the downturn to continue due to consecutive interest rate hikes, the Iran war impact, and government tax changes. Charter Hall Group chief executive David Harrison suggested investors underestimate the tax policy tweak's impact, predicting capital will move from residential to commercial property. Aware Super's Deanne Stewart remains net positive on private credit despite Bathla's high leverage.