Australian house prices will drop without an interest rate cut, analysts from Morgan Stanley have warned in a new report.
In a note released to investors on Tuesday, Morgan Stanley analysts wrote that “without further interest rate cuts the current housing cycle is in danger of gradually fading”.
An oversupply of apartments will also affect inner city property rates according to a report by Sydney Morning Herald.
“If you’re an investor, you’ve missed the boat,” said Morgan Stanley analyst Malcolm Wood, warning that the housing boom is finally over.
Analysts also warned that an oversupply of new apartments in the next few years would put pressure on rental prices.
According to the Australian Bureau of Statistics, house prices in Australia have grown 15.2 per cent since the interest rate cuts in November 2011, and prices now sit at record high levels.
The average national house price is $539,400, pushing many first home buyers out of the market.
Speaking to the Sydney Morning Herald, RP Rismark analyst Tim Lawless said that first home buyers were not participating in the market.
“There is an extremely low number of first home buyers active in the housing market currently,” Mr Lawless said.
But Mr Lawless said that the drop in housing prices was welcome news for buyers.
“The level of discounting has risen slightly indicating that buyers have a slightly better position when negotiating on the contact price,” he said.