Mortgage defaults may be up and new home sales down, but the Australian property market is unlikely to crash and burn.

That's the message from a new report from investment research group Morningstar. The report argues that while housing is "wobbly", it is unlikely to suffer a structural collapse. This is despite deep household vulnerability to further rate rises.

Even so, the report argues that Australia's increasingly two-speed economy is a "serious problem" for the market, with weak demand in the retail, manufacturing and tourism sectors causing confidence to slide.

The publication of the report comes alongside the release of Housing Industry Association figures revealing that sales of new homes in April were down 10% on the same period last year. Mortgage defaults have also climbed to record levels, according to a report by FitchRatings. The report reveals that defaults of 30 days or more are now at 1.79%, compared with just 1.37% three months ago. Low-doc defaults of 30 days or more were now at 6.74%, higher even than during the GFC.

FitchRatings attributed the higher default rate to a 'Christmas debt hangover', the impact of floods and the November interest rate rise: while arrears typically stabilise throughout teh year as families pay down their debt, but Fitch associate director James Zanesi warned that interest rate rises could add further stress to households.