Morgan Stanley Forecasts 15 Per Cent Fall In Home Values
Analysts now predict a sharper decline in Australian housing prices by the end of 2027.
Updated on Oct. 21, 2026 in Residential
Live Poll
Do you expect housing prices in your area to fall further over the next year?
Morgan Stanley has revised its outlook for the Australian housing market, projecting a total decline of up to 15 per cent by the end of 2027. This follows a previous forecast of a 5 to 10 per cent drop issued earlier in 2026.
Why it matters
The downgrade in market expectations stems from the prospect of higher interest rates impacting borrowing power and buyer demand. This adjustment comes after significant federal budget changes to property investment taxation were implemented in May 2026.
Analysts have increased the projected housing market correction to 15 per cent, marking a significant departure from the initial 5 to 10 per cent range. This adjustment serves as a critical update to market expectations following recent taxation reforms.
The players
Morgan Stanley
Morgan Stanley is a multinational investment bank and financial services company that provides institutional research and market analysis.
The details
The revised outlook is driven by changing economic conditions that have shifted the baseline for property valuations across Australia. National home values have already trended downwards in line with the bank's earlier estimations, prompting a more cautious long-term projection.
Timeline
May 2026: Federal budget taxation changes and initial 5-10% forecast were introduced.
21 October 2026: The updated 15 per cent decline forecast was released.
End of 2027: The period by which the projected 15 per cent price decline is expected to be reached.
Culture Shift
This market adjustment follows the structural impact of the Australian federal budget's property investment taxation changes. The shift signals a move away from the growth patterns seen over the last 40 years as investors recalibrate to new fiscal realities.
Potential homeowners may find that higher interest rates and cooling price trends impact their borrowing capacity and long-term financial planning. Investors will need to weigh the effects of the May 2026 tax changes against the projected market contraction when making future acquisition decisions.
The takeaway
Prospective buyers and property investors should adjust their financial timelines to account for the bank's revised downward price expectations. Staying informed about interest rate movements will be essential for navigating the cooling housing market throughout 2027.
Further reading
For more analysis on current property trends, visit our Residential section.
Live Poll
Do you expect housing prices in your area to fall further over the next year?
