Morgan Stanley and ANZ forecast prolonged housing market downturns

Financial institutions in Australia and New Zealand have issued warnings regarding extended declines in residential property values.

Morgan Stanley has increased its forecast for Australian house prices, predicting a 10% to 15% fall from peak levels. The firm noted that this would represent one of the largest nominal housing downturns in over 40 years. The broker cited tax changes and rising interest rates as primary drivers and does not expect the market to bottom out until the second half of 2027.

In New Zealand, ANZ economists have downgraded their property forecasts, stating that house prices are expected to drift lower until the middle of 2027. The bank anticipates that prices will end 2026 approximately 2% lower than they began the year. ANZ attributed this trend to the headwinds of higher interest rates and potential further hikes to the Official Cash Rate (OCR) driven by inflation risks from oil prices and exchange rate fluctuations.