THE predicted slowdown in China's economic boom could cause Australian house prices to plunge by more than 5 per cent this year, according to one of the world's most influential credit rating agencies.

Standard & Poor's warned that efforts by the Chinese government to deliberately slow its economy over the next 12 months will have a major impact on Australia's exports throughout Asia.

House prices in Melbourne fell 1.4 per cent in the three months to December last year.

Earlier this week, the Chinese government cut its gross domestic product growth target to below 8 per cent for this year. It is the first reduction in that estimate in eight years - a recognition that the country's rate of growth is not sustainable.

Yesterday Standard & Poor's released a report titled China Soft Landing Would Moderately Impact Australia's Housing Market.