Morgan Stanley analysts are calling the peak of the housing cycle

"Despite the common belief that lower for longer RBA rates will see strong housing conditions persist, we think [APRA's] macroprudential rules are effectively tightening policy settings. Alongside the 10% speed limit on investor property lending, higher mortgage risk weights and a sharp ~100bp repricing on the front book of investor mortgages [higher mortgage rates for new borrowers], we have noted a material tightening of lending standards since mid-2015. Fundamentals are also deteriorating, with slower net migration taking our underlying demand estimate down by ~30k to 155kpa. 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." That underpins the analysts' negative view on the economy, which they reckon will grow more slowly than the central bank expects and push the official interest rate to 1.5 per cent by mid next year. SMH article here: (VIEW LINK)


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