Housing prices could fall 10 percent warns UBS

Housing prices could fall 10 percent as banks crimp riskier lending and the ALP plans to limit negative gearing tax breaks, warns UBS.

The global financial services firm has suggested the number of home loans could drop 30 percent due to credit tightening.

They said the economy could be set for a record long house price downturn.

"We expect further credit tightening, and the RBA’s lack of willingness to cut rates this time, to see the longest house price downturn in decades," the bank advised.

UBS have suggested the risks are now "tilted to the downside", having previously predicted the value of home loans written could drop 20 percent and housing prices could fall 5 percent.

They now expect home loan falls of up to 30 per cent and price drops of up to 10 per cent.

“Positively, the economy and labour market remain solid for now,” UBS noted.

They said borrowing capacity could reduce by around $100,000 for many households with new comprehensive credit reporting rules from mid next year.

Credit card limits and other debts could be taken into account.

National dwelling price to income ratio is near a record high of about 6.5 times. It's around nine times in Sydney and eight in Melbourne. 

Researchers George Tharenou, Carlos Cacho and Jim Xu said the federal opposition’s plan to limit negative gearing tax concessions for future purchases to new housing and halve the capital gains tax concession to 25 per cent.

Moody's recently suggested more borrowers will fall behind on their home loans in 2019.