Australia's surge in home prices is tipped to slow to just two per cent in 2016.
The forecast by ratings agency Fitch represent a sharp slowdown from the average eight per cent annual growth across the nation's eight capital cities between 2013 and 2015.
The prediction came as the latest ANZ-Property Council survey showed key industry players expect a marked slowdown in house price and construction growth.
Decreasing levels of affordability and falling rental yields were key factors driving prices down, Fitch said.
"This is especially the case in Sydney and Melbourne, where price appreciation in recent years has outpaced wage growth," Fitch said.
However Fitch added that low home loan rates should help support the property market during the year.
The ANZ-Property Council survey forecasts a "muted" slowdown for both prices and construction in most states, tempering the housing industry's contribution to economic growth.
ANZ's co-head of Australian economics Cherelle Murphy said confidence in the booming NSW property market had eased, as had indications of future housing construction work.
"Most other states and territories are steadier though, with evidence of a continued improvement in confidence in Victoria and Queensland," she said.
"This is consistent with our view that there will not be a significant downturn, but a more muted profile for housing construction and prices this year."
The national survey of investors, developers and contractors in the property market shows there's still strong appetite from overseas investors despite weaker housing sales activity.
But this may be dampened by stricter foreign investor policy enforcement from the government and turbulence on China's financial markets, the research found.
"Today's survey data suggests that the property industry is bracing for higher interest rates and more prudent credit distribution by lenders," Ms Murphy said.
"We expect, however, that the Reserve Bank may provide some relief for the economy this year, through interest rate cuts, if other sectors do not pick up to compensate for the slower path of housing."
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