That said, UBS economists are not forecasting a crash.
According to UBS, annual house price growth will fall from 10 per cent now to 7 per cent by year end.
It will then slide to between zero and 3 per cent in 2018.
“We ‘called the top’ [in April] and now have increased confidence a correction is unfolding, but still don’t see a crash,” economists George Tharenou and Scott Haslem said in the report.
“Looking ahead, price growth has likely already peaked, and we still see moderation ahead, amid record supply/completions, poor affordability and rising mortgage rates. But, we still don’t see prices dropping given booming ‘people’ growth.”
They say there will be no crash with the Reserve Bank of Australia not raising rates for some time.
That, they say, “reduces the chance this becomes a crash where commencements plunge to prior cycle lows closer to 130,000 (a year) which would then see a weaker labour market and falling prices”.
The UBS report follows NAB’s residential property index law week falling 17 points to 14, taking it to its lowest level since mid-2016 with confidence in Australia’s property market plummeting.