Craig James sees only one possible rate rise in 2018

Commsec senior economist Craig James has suggested the “nature of the housing market landing” was a key issue for 2018, with issues of oversupply looming to the fore in certain areas of Sydney, Melbourne and Brisbane as significant numbers of apartments come on to the market.

But James said strong population grown and demand from first home buyers would help prop up the market.

James told The New Daily that Australians should be “alert to the potential changes that may be coming” when the Reserve Bank of Australia meets during next year.

He sees the cash rate as likely between the current 1.5% rate and 1.75%.

“Housing is a matter of supply and demand and housing demand can change markedly from region to region.”

Buyers should get educated to make sure they’re in the know as changes come through the property market, Mr James said.

James noted that now is the time to get your finances in order.

“One of the best investments is to pay off your home loan and pay it off as quickly as possible,” he said.

“If you are in the situation where you’ve got some extra cash available, the general advice is paying off your home loan is a very attractive thing to do in terms of your longer term financial health.”

James' year in preview advised "the nature of the housing market ‘landing’ and path of unemployment to the ‘full employment’ level near 5.00 per cent are key issues for 2018."

He recently noted the Reserve Bank has reason to feel comfortable about the health of the financial system.

"Lending is growing, but at a rate less than nominal growth of the economy.

"And businesses seem to be finally embracing the low interest rates on offer at a time when housing lending is softening.

"While regulators have been successful in slowing down bank lending (especially for housing), non-bank lenders appear to be filling the void.

"In fact lending by non-bank lenders is growing at the fastest pace in almost a decade.

"With the housing market stabilising, regulators may need to take a fresh look at lending trends in 2018."

Craig James is chief economist at CommSec.