National house price growth is set to slow, but that doesn't mean the economy will stutter, economists say.
Soaring home prices in Sydney and Melbourne have heightened fears of a property bust, and some analysts have recently forecast a fall in prices in the coming years due to the rising supply of apartments and slowing population growth.
However AMP Capital chief economist Shane Oliver says house prices in Sydney and Melbourne will continue to rise in the coming years, just at a slower rate.
He forecasts price growth to slow to around five per cent in the year ahead, down from Sydney's 16.5 per cent growth in the past year, and Melbourne's 12.9 per cent.
"Nationwide price falls are unlikely until the RBA starts to raise interest rates and this is unlikely before 2017," Dr Oliver said.
A surge in interest rates or an oversupply of housing would pose an economic risk, he admits, but both are unlikely.
"The RBA knows about the increased debt sensitivity of households so this would require the RBA to get it wrong badly," Dr Oliver said.
A current housing construction boom would need to carry on for several more years before oversupply became an issue, he added.
JP Morgan economist Ben Jarman has also played down the fears of a property sector crash, saying the changing dynamics are more likely to impact the apartment sector, which remains a small segment of the overall market.
Population growth, investor activity and new construction have all been key to fuelling apartment price growth, he said.
Therefore a fall in migration and efforts to curb investor lending will hit apartments hardest, while the detached dwelling market should prove more resilient, he said.
