MELBOURNE - [AAP] The Aussie property boom is nearing its end, with housing price growth to run in the low single-digits in 2018, a leading economist says.

But it will be a soft landing rather than a property market crash.

HSBC's chief economist for Australia, Paul Bloxham, says house prices in Sydney and Melbourne have been growing at low double-digit annual rates over the past five years.

But during the past six months Sydney prices have fallen one per cent and Melbourne price growth has slowed to a seven per cent annual rate, he said.

"A hard landing is possible, but we believe this would require a negative shock from abroad and a sharp rise in the unemployment rate," Mr Bloxham said.

"We do not see a significant local housing imbalance and view Australia as having had a housing boom rather than having a housing bubble."

Mr Bloxham said the slowdown in Sydney and Melbourne had been driven by increased supply, higher lending rates for investors and a retreat in foreign demand, which had softened partly due to lending constraints by domestic banks and higher local taxes.

"We expect these factors to continue to weigh on housing price growth in the coming quarters and retain our forecast that national housing price growth will slow from the double-digit rates of recent years to three to six per cent in 2018," he said.

Mr Bloxham said HSBC had revised down its forecasts for Sydney and bumped up 2018 predictions for Melbourne, given recent trends and changes in population growth estimates.

He said Sydney housing prices were tipped to grow by two to four per cent next year, while growth was expected to be between seven to nine per cent in Melbourne.

Mr Bloxham said housing construction activity was likely to remain high over the next six to nine months, given the large pipeline of apartment building already underway.

 

AAP logo image

© [2017] Australian Associated Press Pty Limited (AAP) or its Licensors. This is the Morningstar service with content provided by AAP where indicated. AAP reserves all rights, including copyright, in services provided by it. The information in the service is for personal use only, does not constitute financial product advice (whether general or personal) and may not be re-written, copied, re-sold or re-distributed, framed, linked or otherwise used whether for compensation of any kind or not, without the prior written permission of AAP. You should seek advice from a professional financial adviser before making decision to acquire or dispose of a financial product.

This service is published for general information purposes only without assuming a duty of care. AAP is not in the business of providing financial product advice (whether personal or general advice), and gives no warranty, guarantee or other representation about the accuracy of the information or images contained in this service. AAP is not liable for errors, omissions in, delays or interruptions to or cessation of the services through negligence or otherwise. The globe symbol and "AAP" are registered trademarks.