Real estate price falls up to 15 per cent: Morgan Stanley

Wealth management giant Morgan Stanley has said property prices could fall up to 15 per cent given the plunge in rental markets across Sydney and Melbourne's inner-city suburbs.

They suggested the damaging rental market will flow through to price declines and we will see a similar downturn to what we saw when prices dropped between 10 to 15 per cent until mid-2019.

“We expect the rental market to be a key channel of weakness, with any forced selling only later in the year as policy support is eased,” Morgan Stanley said.

“We expect a broad housing downturn, with the rental market in particular likely to weaken, as higher unemployment and a reduction in net migration both work to reduce housing demand, pushing vacancy rates higher and rental prices lower,” Morgan Stanley said.

SQM Research suggested price falls could be closer to 30 percent, however Morgan Stanley expect declines to be gradual in the near-term, given the significant amount of support being provided by the government and banks.

“However, given our expectation that unemployment is likely to stay elevated for some time, these measures will only delay housing stress and forced selling to later in the year,” the bank added.