A major Australian lender has predicted the nation’s property markets are in for two years of falling prices.

According to a report in the Australian Financial Review yesterday, a research note from Macquarie Bank’s wealth management division predicts property prices will fall by up to 7.5% over the next two years.

The note claims slow population growth and an oversupply of apartments will combine to cause the price adjustment.

“The combination of strong supply and weak population growth means that the housing market has a period of adjustment ahead of it," the note said.

"The extent of house price adjustment is contingent upon the pace of retrenchment in the supply of new housing into the market.”

Macquarie Bank also predicts construction levels will fall in the near future, with the number of new homes built to fall to 161,000 by June 2016 and then to 150,000 in the year to June 2017.

The bank’s note also said the price correction period could last even longer, as it is likely to occur during a weak period in the broader economy.

"The absence of factors that supported previous adjustments also suggests that the adjustment phase to the current episode may be longer, slower and more prone to shock than prior instances.”

"Additionally, more may be required of prices, construction and rates to drive normalisation.”

Macquarie’s fear of oversupply issues put the bank at odds with the head of one of the country’s biggest residential developers.

Stockland chief executive Mark Steinert said last week that oversupply in Australia’s biggest markets would be avoided as the Australian Prudential Regulation Authority's actions on investment lending growth had resulted in many residential developments not going ahead.