House prices across the west could be set to plummet according to new predictions from national ratings agency Moody’s.

Revising downwards its predictions for the nation’s property market, the agency on Tuesday last week said it believed house prices would drop 7.7 per cent through 2019.

In January, when it released its first forecasts for the year, it predicted a three per cent fall.

Melbourne’s drop-off is tipped to be even more acute, with the agency now predicting an 11.4 per cent fall in the city’s house prices. In January, it was tipping a six per cent decline.

The west of Melbourne is not expected to drop as sharply, but Moody’s is still predicting an 8.5 per cent fall.

Moody’s said house prices were being driven down in part by soft household consumption, which was being compounded by low wages growth.

“The underlying trend in consumption has been weak, as consumers have dipped into savings absent decent wage growth over the past few years,” it said.

“The downside risk is that the housing market declines sharply, more than expected, and the negative wealth effect becomes concerning across households, causing consumption to drop and the overall unemployment rate to rise.”

Moody’s said there was a risk of further falls, partly due to tightening credit conditions. But YPA Melton sales director Shane Spiteri said it was simply a matter of the market correcting and some perspective was needed.

“What it has done is made it more affordable for first-home buyers and those downsizing to buy back into the market, because 12 months ago it was impossible,” Mr Spiteri said.

“Melton went up $150,000 in 12 months, so while the market might be down eight per cent, it did go up 15 per cent before that.”

– with The Age