Property prices are predicted to fall by up to 10 per cent in some states with economists tipping a housing surplus in 2017. In a new report, Goldman Sachs predicts population growth will slow to 1.25 per cent over the next three years due to low birth rates, high death rates and falling net migration. This is significantly lower than widely-used Australian Bureau of Statistics population predictions of between 1.7 and 1.8 per cent - which Goldman Sachs analysts Tim Toohey and Andrew Boak label as 'too optimistic'. This will create an oversupply and see property prices fall by between 5 and 10 per cent in markets where construction supply has been strong – particularly inner-city Melbourne and Perth – according to BIS Shrapnel managing director Robert Mellor. Scroll down for video . A new housing development at 88 Alfred Street in Milsons Point, on the lower north shore of Sydney, with panoramic views of the harbour . Sydney will be one of the only markets not to be hit by an oversupply of housing in the next three years, according to economists . Property prices are predicted to fall by up to 10 per cent in some states with economists tipping a housing surplus in 2017 . 'It is correct to talk about the markets going to go from chronic undersupply to the fact there will be excess supply developing in a number of markets,' Mr Mellor told Daily Mail Australia. 'One market we've been concerned about for quite a long time is inner city apartments in Melbourne, such as in Docklands, Southbank and the CBD. 'While there might be a shift in demand patterns with renters wanting to live closer in, it's not going to be sufficient. 'Supply will swamp the amount of demand and lead to excess supply, and you're going to find a substantial reduction in rents and the risk of falling values.' Mr Mellor said there is a likelihood Perth, Canberra and Adelaide will see declines. 'Perth is seeing a substantial turnaround in supply at the moment and a reduction in underlying demand,' he said. 'Even in markets like Adelaide construction has been relatively strong and as a result there could be some excess supply. Goldman Sachs predicts population growth will slow to 1.25 per cent  due to low birth rates, high death rates and falling net migration . Property prices could fall by between 5 and 10 per cent in markets where construction supply has been strong . This new housing development is at 8 Bank Street in the West End, Brisbane. Brisbane will also be relatively stable, economists say . 'Canberra has a significant excess supply because of overbuilding of inner city apartments.' He added that there was no risk of oversupply in Sydney. 'In Sydney the underlying level of demand is so strong relative to supply, and the fact this is a market where there hasn't been enough building. There is very little risk of excess supply developing in this market in the next three years to five years. 'Brisbane does have some risk that problems could occur but then again the timing of that is going to be dependent on how much more supply comes into that market over the next couple of years.' Goldman Sachs forecast a 75,000 underlying surplus of established homes across Australia by the end of 2017. The report predicts that Australia's population will be 530,000 smaller ABS estimates for 2017. 'It is correct to talk about the markets going to go from chronic undersupply to the fact there will be excess supply developing in a number of markets,' BIS Shrapnel managing director Robert Mellor said . In Sydney the underlying level of demand is so strong relative to supply, and  there hasn't been enough building activity, he said . Goldman Sachs forecast a 75,000 underlying surplus of established homes across Australia by the end of 2017 . This is tipped to reduce potential economic growth from 2.9 per cent to 2.5 per cent for the 2015-2017 period. 'A lower "potential" rate of economic growth suggests disinflationary pressures will stabilise through 2015 and support the case for interest rate rises through 2017, and the RBA will likely be in the position of lifting interest rates into an oversupplied housing market,' Mr Toohey and Mr Boak write. 'Australia will need 105,000 fewer homes by the end of 2015 relative to that suggested by [ABS figures], 165,000 fewer homes by the end of 2016 and 215,000 fewer homes by the end of 2017,' the report states. Australia's population growth is set to slow sharply through 2015, according to Goldman Sachs, with births declining 'at the fastest rate on record' and uncertain labour markets affecting net migration. 'We also suggest the rate of growth of deaths will easily double its historical average over the coming decade as the sheer number of individuals moving into age brackets with higher mortality rates swamps any further extension to average years lived,' the report states. Declining populations are tipped to reduce potential economic growth from 2.9 per cent to 2.5 per cent for the 2015-2017 period . Australia's population growth is set to slow sharply through 2015, according to Goldman Sachs, with births declining 'at the fastest rate on record' and uncertain labour markets affecting net migration .
House prices tipped to fall by up to 10 per cent in some states with economists predicting a housing surplus in 2017 .
Goldman Sachs predicts population growth will slow to 1.25 per cent over the next three years creating oversupply .
Biggest hit will be in markets where construction supply has been strong, such as inner-city Melbourne and Perth .