Capital city price growth will slow in the new year to between 2 and 5%, with price growth from Sydney and Melbourne unlikely to meet that of 2015, according to new data released from Domain.com.au.

The Domain State of the Market report states while house prices are expected to increase in 2016 across all capital cities, they will do so at more subdued rates.

Domain.com.au senior economist Dr Andrew Wilson said buyers and sellers will see a significant change to the dynamic of Australia’s capital city housing markets in 2016.

“Australian housing markets have generally experienced a rollercoaster ride of buyer activity and prices growth through 2015, in the face of dramatic changes to interest rates, he said.

"Depending on local supply and demand, we are likely to see house price growth of between two and five per cent over the next 12 months. The extraordinary prices growth reported by Sydney and to a lesser degree Melbourne over the past year will not be matched over 2016, with those markets rapidly returning to the pack. 

"While the housing market is likely to be relatively subdued comparatively, it is likely that activity from some buyer types – particularly investors – will remain robust and increase. Despite higher interest rates, investors will be drawn to the relatively high yields available and continued taxation advantages – particularly for small-scale investors."

National house price growth expectations for 2016
The following table outlines the expected house price growth for each capital city: