National Australia Bank has pulled back on its expectations for 2017's house and unit prices on the back of softer market sentiment and recent weaker than expected price outcomes.
NAB reduced its house price expectation in its Residential Property Survey on Thursday, down to five per cent growth in 2017, from 7.2 per cent, and more than halved its 2017 forecast for unit price growth to 3 per cent, from 6.8 per cent.
The lender expects prices of detached houses to gain 4.3 per cent in 2018, and units to fall 0.3 per cent.
NAB chief economist Alan Oster said low interest rates and pent-up demand in some areas still support the housing market, but its run could be nearing an end.
He echoed an ensemble of experts now forecasting a gradual "cooling phase" on the back of several years of very strong price growth.
"Our expectations around subdued wages growth remain, suggesting affordability will be a major constraint on the market, especially if credit conditions continue to tighten," Mr Oster said.
"This along with record levels of housing construction activity (mainly apartments) and moves to limit foreign demand for housing will likely limit the potential for future price gains."
Mr Oster said Sydney and Melbourne will both see slower growth in prices in the second half of 2017, while Brisbane, Adelaide and Hobart will also cool and Perth will remain weak.
"These trends will broadly continue into 2018, with growth in Sydney and Melbourne returning to more sustainable levels," he said.
But Mr Oster said tougher measurers on banks announced by regulators to rein in investor lending have impacted sentiment among property industry professionals.
NAB's housing market sentiment index fell to its lowest level in a year in the June quarter, after climbing to a three-year high in March.
"The survey results indicate that while first home buyers were more active in both new and established property markets in the June quarter, local investors retreated from the market," he said.
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