NAB: The hot spots for Australian house price growth over the next 12 months

TORSTEN BLACKWOOD / AFP / Getty Images

Like an increasing number of analysts, the National Australia Bank’s (NAB) Australian economics team think that Australian house price growth will slow sharply in the coming years, led by Sydney and Melbourne.

Based on its latest forecasts, the NAB sees capital city house prices increasing 3.4% next year before slowing to 2.5% in 2019. For units, prices are tipped to rise by just 0.5% in 2018 before falling 0.3% in 2019.

From an individual capital perspective, the NAB expects the slowdown to be most acute in Sydney and Melbourne, as seen in the two tables below.

The first shows the NAB’s price forecasts for houses.

Source: NAB

And here’s the same table, only for units.

Source: NAB

Alan Oster, chief economist at the NAB, says the updated forecasts reflect a variety of factors that will act slow price growth, offsetting continued strong demand from high population growth and relatively-low interest rates.

“More moderate market conditions reflect a combination of factors which vary across markets, including deteriorating affordability, rising supply of apartments, tighter credit conditions and rising interest rates in the second half of 2018,” he says.

“But still relatively low mortgage rates, a favourable housing supply-demand balance and strong population growth population growth should continue to provide support for prices going forward.”

While from a broader perspective the NAB expects price growth to slow, it has also supplied this map showing the locations where property price growth is likely to exceed state averages over the next 12 months.

Source: NAB

NOW WATCH: Money & Markets videos

Want to read a more in-depth view on the trends influencing Australian business and the global economy? BI / Research is designed to help executives and industry leaders understand the major challenges and opportunities for industry, technology, strategy and the economy in the future. Sign up for free at research.businessinsider.com.au.