House prices falling at the fastest rate in 35 years: Morgan Stanley

House prices falling at the fastest rate in 35 years: Morgan Stanley
House prices falling at the fastest rate in 35 years: Morgan Stanley

House prices are falling at the fastest rate in 35 years, according to global investment bank Morgan Stanley.

In October Morgan Stanley predicted the downturn, suggesting it will be the largest since the early 1980s.

And December's 1.8 percent house price slide in Sydney put the harbour capital's housing market at a 3.9 percent decline over the last three months of the year, the bank noted according to CoreLogic's figures.

That equates to an annualised figure of nearly 16 percent.

Nationally house prices declined 1.4 percent over December, the largest house price decline since 1983, to be 6.7 percent down over the year.

Morgan Stanley have advised that the likelihood of a disorderly market correction and economic recession has increased. 

Morgan Stanley did note some of the housing weakness in December was "seasonal."

However its model of six key market indicators, ranging from credit supply to house price expectations, suggests approvals and prices will continue to fall with a likely peak to trough decline of between 10 and 15 per cent.

House prices falling at the fastest rate in 35 years: Morgan Stanley

"A rate of the continuation of the rate of decline in December would be a signal we are shifting to this scenario (a balance sheet recession)," Morgan Stanley's analysis suggested.

"With entrenched weakness across all aspects of the market, 2019 looks unlikely to hold an improvement."

"Focus is now on the broader economic impact of the ongoing correction. further details continue to suggest a sustained deterioration in conditions, with few signs of a turnaround," the report warns.

Last year saw a number of the big banks change their house price forecast, having initially saw only small declines over 2018 and 2019.

ANZ revised their housing market forecast in November, instead seeing prices falling as much as 20 percent in Sydney and Melbourne.

They previously predicted 10 percent falls peak to trough on their second forecast revision in June 2018.

In October NAB changed their predictions, suggesting the orderly correction in house prices will continue over the next 18 to 24 months, with Sydney units falling around 10 percent and Melbourne houses over eight percent.

Now AMP Capital's Shane Oliver, Industry Super's Stephen Anthony and Market Economics' Stephen Koukoulas believe the RBA will cut interest rates this year.


Joel Robinson

Joel Robinson

Joel Robinson is a property journalist based in Sydney. Joel has been writing about the residential real estate market for the last five years, specializing in market trends and the economics and finance behind buying and selling real estate.

Morgan Stanley 2019 Property Price Forecast

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