(Australian Associated Press)
House price growth is expected to slow dramatically in the year ahead, with one of the big four banks slashing its predictions for all capital cities.
National Australia Bank expects overall capital city house prices to rise by just one per cent in 2016, a downgrade from its previous forecast of 2.3 per cent.
Brisbane is forecast to be the best city for price growth with an increase of three per cent, followed by Melbourne with a rise of two per cent.
House prices in Sydney are expected to rise by just 0.6 per cent, a dramatic slowing from 2015’s 11.5 per cent growth, while Adelaide is set to increase by 0.2 per cent.
Perth house prices are expected to fall three per cent, while a drop of 0.6 per cent is forecast for Hobart.
The bank has lowered its forecasts because of credit restrictions on investors and worsening affordability in Sydney, and to a lesser extent Melbourne.
The large number of homes in development, particularly apartments, are also expected to more than offset new demand.
“Weakening fundamentals have already seen the market starting to cool, suggesting the best of the price gains are probably behind us,” NAB chief economist Alan Oster said.
Overall, national capital city house price growth in 2015 was 7.8 per cent, down from 8.4 per cent in 2014.
NAB said Australian investors are less active in new and established markets, while foreign buyer activity also weakened in most states except Queensland.
“Aside from the strong supply response in the apartment sector, a greater reliance on foreign buyers adds a degree of unpredictability to the outlook, both positive and negative,” Mr Oster said.