NAB forecasts price growth to halve in 2018

The National Australian Bank has tipped a halving of house price growth in the nation's major capitals because of rising rates, tougher regulation and falling affordability.

Other factors contributing to the scenario include slow wages growth, falling overseas demand, record low rental yields and a big increase in apartment supply in some cities.

House prices are expected to grow by about 4.3 percent next year, which is less than half the current rate in four of the nation's capital cities.

Apartment values are expected to go into reverse dropping 0.4 percent, according to the bank's analysis.

The report follows research by ANZ earlier this month saying housing price growth would slow to 4.4 percent this calendar year down from 10.9 percent last year.

The NAB report, being circulated among mortgage brokers, claims property is "more resilient than expected", led by strong growth in Sydney and Melbourne shrugging off concerns about apartment over-supply.

House prices across the nation are expected to grow by 7.2 percent with apartments by 6.8 percent for the remainder of 2017.

"Ongoing strength in housing demand is expected to help offset supply concerns, although policy responses are creating additional uncertainty," the report says.

"On a more positive note, population growth is expected to remain solid, especially in Victoria, helping to drive underlying demand and soak-up some of the feared excess in supply," it says.

The NAB has increased its price projections for Sydney for the remainder of the year from 4.5 percent to 10.5 percent.

"Price forecasts have been revised higher, but risks still linger," the report says of the Sydney market.

It has also revised growth for Melbourne from 5.6 percent to 10.8 percent for this year before slipping to 5.5 percent next year.

"Melbourne is performing well, although over-supply concerns drive a wedge between house and unit prices. This divergence is expected to continue," the report concludes according to the Australian Financial Review article.

Brisbane's apartment sector will continue to under-perform but overall growth is "relatively steady", the report states.

House prices are expected to increase by 1 percent and 2 percent next year. Apartment prices are likely to fall by up to 2 percent this year and next.

Adelaide is steady, despite low economic growth and high unemployment. Adelaide house prices are expected to grow about 2 percent this year and 1.7 percent in 2018.

Perth's apartment and house prices are expected to continue fall by up to 6 percent during the remainder of the year.

"Tentative signs that both the local economy and property market may stabilise in the medium term suggest we could see flat-to-modestly higher prices from 2018," the report states.

Prices in Hobart have been accelerating because of an improving economy and affordability.

"Further gains are expected, but at a slower rate," the report concludes. House prices in the Tasmanian capital are expected to grow by about 7 percent this year and slow to 1.7 percent next. Unit prices are also expected to slow.