A global investment bank has predicted Australia will soon reach the peak of its housing cycle, with ongoing implications for the national economy.
A research note released by Morgan Stanley’s strategy team to investors has predicted that the end of Australia’s property boom is near.
"We are now calling the peak in the housing cycle, and expect further falls in auction clearance rates and house-price momentum, with a negative impact on construction occurring over 2016,” Fairfax Media quoted the report as stating.
The report cited declining migration rates and the recent changes to investor lending policies as part of the reason behind declining house price growth.
“Despite common belief that lower-for-longer RBA rates will see strong housing conditions persist, we think macro prudential is effectively tightening policy settings," it stated.
"Fundamentals are also deteriorating, with slower net migration taking our underlying demand estimate down by 30,000 to 155,000."
A turn in fortunes for the housing market at large would be likely to have flow-on consequences for the economy at large, according to Morgan Stanley.
"This outlook anchors our bottom-of-consensus forecast for 1.9 per cent GDP and 0.7 per cent domestic demand growth in 2016, and we believe recession risks are elevated as regulators attempt a difficult soft landing of the housing market amidst external and income challenges," the bank said.
The prediction comes in the wake of declining auction clearance rates in Australia’s largest city, Sydney.
Over the space of three weekends, Sydney’s clearance rate has fallen from 75.1 per cent to 72.4 per cent and now to 71.3 per cent, according to APM PriceFinder.
The city posted a clearance rate of 78.3 per cent on the corresponding weekend last year.
Despite the decline in clearance rates, and a 9.1 per cent decline in the number of sales, Sydney’s median house price jumped 16.5 per cent to $920,000 and the median unit price jumped 12.3 per cent to $565,000 over last year’s results.