Goldman Sachs sees a fifth Australian rate hike as Morgan Stanley says home prices fall 15%
Reserve Bank deputy governor Andrew Hauser put a fifth 2026 rate hike in play and Goldman Sachs changed sides. Morgan Stanley has already priced the outcome: a 10% Australian housing fall if the bank holds, 15% if it hikes, and no floor before late 2027.
Vincent Jiang · 3 min read
One board vote, two housing paths
Reserve Bank of Australia deputy governor Andrew Hauser told a Citi conference in Sydney on Wednesday that the inflation outlook is "materially worse" than the bank's August forecasts, naming the Middle East oil shock, the AI and technology boom and weak productivity as the pressures 14. The board has already lifted its cash rate four times this year, from 3.60% to 4.60% 2.
Goldman Sachs+2.18% — Goldman Sachs, up 2.18 percent as of its last quote switched its call the same day and now expects a fifth rise, to 4.85%, on November 3; UBS expects one too 34. Futures imply roughly a 40% chance of that, and Bloomberg-based pricing puts it at 51% 14.
Four hikes took Australia's cash rate to 4.60%; Goldman adds a fifth on November 3
- Cash rate target
- Estimate
Data
| Cash rate target | |
|---|---|
| Jan | %3.6 |
| Feb | %3.85 |
| Mar | %4.1 |
| May | %4.35 |
| Sep | %4.6 |
| Nov (GS) (estimate) | %4.85 |
Morgan Stanley+3.61% — Morgan Stanley, up 3.61 percent today priced the damage. A team led by economist Chris Read now expects national home values to fall 10–15% from their March peak, bottoming in the second half of 2027: the deepest nominal housing downturn in more than 40 years, and roughly double the 5–10% it forecast after May's budget 56. If the bank holds, about 10% 5. If it keeps tightening, toward 15% 5.
Morgan Stanley's floor matches the other banks' worst case
- Estimate
Data
| Value | |
|---|---|
| Westpac (estimate) | 7.3% |
| CommBank (estimate) | 9% |
| Morgan Stanley, hold (estimate) | 10% |
| Morgan Stanley, hike (estimate) | 15% |
| AMP stress case (estimate) | 20% |
The fall is a third done, and nothing says stop
Cotality, the property data firm formerly known as CoreLogic, put September's fall at 1.1%, a sixth straight monthly decline, leaving national values 5.2% below the March peak 56. The Australian Bureau of Statistics says the total value of Australian homes dropped $34.1 billion in the June quarter to $12.7 trillion, the first quarterly fall since 2022 5. None of the five bottom signals Morgan Stanley watches, from rate-cut pricing to auction clearances, has flashed for nine months 5.
Lenders are covered; the insurers are not
The Reserve Bank's October Financial Stability Review says most borrowers hold positive equity and large savings buffers, and banks are well capitalized for a material downturn 7. Its stress case, a uniform 20% price fall, tips only about 5% of mortgages into negative equity 5.
The tail risk sits one layer down, with lenders mortgage insurers, who pay the bank when a forced sale fails to clear a loan. That market, led by Helia and QBE LMI, has not faced a serious national downturn since the early 1990s 5.
Helia, the biggest, posted a 25% fall in first-half net profit to $100.0 million, with gross written premium down 44% to $61.6 million after losing Commonwealth Bank's new business 58. Home insurers face the mirror image: rebuilding costs rose about 30% in the five years to March 2026 even as sale values fall 5.
The shallow end has its own economists
Westpac sees a 7.3% peak-to-trough fall and a 3% recovery in 2027; Commonwealth Bank sees about 9% 9. Both lean on supply: only 1.2% of dwellings are listed for sale against a 20-year average of 1.8%, with little sign of forced selling 9. On that reading, Morgan Stanley remains the outlier it was in May 6.
What settles it
September-quarter inflation lands on October 28, with core inflation seen near 3.5% against the bank's 2–3% target 13. The board decides at 2.30pm in Sydney on November 3 3. Helia's third-quarter update, the first hard read on arrears, follows within weeks 5. Hauser calls the housing slowdown evidence that policy is working; Morgan Stanley calls it one-third of the deepest fall in four decades 16.
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