NAB: House price growth to slow sharply in Sydney and Melbourne

House price growth is forecast to slow to a virtual standstill in Sydney, with much softer conditions also tipped for Melbourne and most other capital cities. Economists at the National Australia Bank on Wednesday cut their growth forecasts for average capital city house prices in 2016 to 1 per cent, down from 2.3 per cent previously. They cited weaker conditions in all capitals, amid more restrictive bank lending to property investors and less interest from foreign buyers in most markets, except Queensland.

The economists forecast Sydney house price growth would slow sharply in 2016 to a meagre 0.6 per cent, compared with double-digit growth in the last three years. Melbourne house price growth is forecast to be 2 per cent, down from 11.7 per cent last year, while the bank tipped price falls of 3 per cent in Perth and 0.6 per cent in Hobart, and growth of just 0.2 per cent in Adelaide.

The report said Brisbane would post the strongest performance with expected price growth of 3 per cent, helped by stronger interest from foreign investors in contrast to other states. In its first forecast of unit prices, NAB predicted price falls in most capital cities, with Sydney apartment prices tipped to fall 0.6 per cent and Melbourne unit prices to fall 3 per cent after a boom in construction.