The housing cycle in Australia has peaked, according to Morgan Stanley analysts.
Stricter regulations on lending, slowing immigration and inflated property prices are set to take their toll on the property sector say the wealth management company.
“Despite common belief that lower-for-longer RBA rates will see strong housing conditions persist, we think macroprudential is effectively tightening policy settings,” the bank said.
“Fundamentals are also deteriorating, with slower net migration taking our underlying demand estimate down by 30,000 to 155,000.”
“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.”
With resource sector investment experiencing a sharp decline, Morgan Stanley said a slowdown in the housing sector would come at an awkward time when the economy was trying to escape drags on gross domestic product.
The warnings join a growing list of economists saying that weakening property demand in Melbourne and Sydney could lead to an oversupply of housing, especially apartments.
Across the nation, auction clearance rates have been dropping, they were around 80 per cent in April but are not hovering at around 70 per cent.
Statistics also show that tighter lending requirements for investor loans has seen investor loan growth drop from 29.6 per cent in April to 16.5 per cent in July.
While Morgan Stanley say the national housing cycle is peaking now or about to peak, it’s fair to say it has well and truly peaked in cities and regions outside of Melbourne and Sydney reflecting the country’s two-speed property sector.
The two biggest capitals are way ahead of the rest, with Perth and Darwin actually going backwards for 2015.