Melbourne property prices are expected to fall even further than initially forecast.

Melbourne’s property market correction will be twice as bad as earlier predictions, according to a revised forecast from Moody’s Analytics.

The respected risk management advisory group has warned the city’s market correction will be the worst in the nation this year.

It has almost doubled its estimates for house value losses to 11.4 per cent in the latest CoreLogic-Moody’s Analytics Australia Home Value Index Forecast released today.

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For a $718,000 median value house, the loss would work out to about $86,000.

Moody’s expected only a 6 per cent loss for the city in the January edition of the report.

The sun appears to have well and truly set on Melbourne’s last home price boom.

The dismal forecast adds to the about 12 per cent housing value hit Melbourne has already taken since the market peaked in December 2017.

The western suburbs are the city’s best positioned in terms of price falls, with values expected to decline 8.5 per cent.

The city’s inner east is expected to bear the brunt of the correction, with losses predicted at 16.3 per cent.

WHERE THE PAIN WILL BE FELT

Inner Melbourne — 11.4%

Inner east — 16.3%

Inner south — 14.2%

North east — 8.5%

North west — 9.3%

Outer east — 11.9%

South east — 9.4%

West — 8.5%

Mornington Peninsula — 10.1%

*Source: CoreLogic, Moody’s Analytics

Expected house value loss in 2019

Double-digit losses are also tipped for the city’s inner suburbs, inner south, outer east and on the Mornington Peninsula.

Moody’s economist Katrina Ell said the city’s prospects had taken a hit as home sales data from CoreLogic early in the year proved worse than expected.

“(But) it’s not time for panic,” Ms Ell said.

“Unless you are wanting to sell your home, then it’s not a situation you need to be concerned with — and if you are selling, you are buying into this market.”

House price falls were “necessary” after the huge gains in recent years.

The correction had been made “necessary” by exceptional home price growth in the five years preceding the correction.

“If they had continued at that high rate, we would have been in for a much sharper correction than we have now,” Ms Ell said.

Despite the grim forecast, a growing population and slowing housing construction had put a “floor” on potential losses, and it is expected the market will begin its recovery in mid-2020.

In a silver lining for homeowners, continued falls could prompt a cut to interest rates by September this year.

The losses will be felt across Melbourne’s suburbs.

However realestate.com.au chief economist Nerida Conisbee contested the claims, arguing its figures showed Melbourne’s home values were down just 4.1 per cent over the past year.

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The Moody’s forecasting does not include flow on effects from the federal Labor Party’s plans to alter negative gearing — which Moody’s tipped would push home prices even lower, and slow down any recovery in Melbourne.