Australian house price growth is slowing, auction clearance rates are falling and housing finance is also starting to soften, all pointing to cooling in the broader housing market after years of strong price growth.
The question that many are now asking is whether this slowdown will lead to outright price declines -- as has been seen in some Australian capitals recently -- or whether this slowdown, like so many others before it, will be modest in scale.
To Paul Bloxham, Chief Australia and New Zealeand Economist at HSBC, the housing market is likely to experience a soft landing in 2018, unless there's a global shock.
"We do not expect a sharp decline in housing prices," he says.
"Although we see the RBA beginning to lift its policy rate in 2018, we expect only a slow pace of cash rate tightening and some relaxation of current tight prudential settings as the housing market cools."
As for the risk of a more pronounced slowdown, Bloxham says there is a risk, but if it were to occur it would likely be driven by external rather than domestic factors.
"A hard landing is possible, but we believe this would require a negative shock from abroad and a sharp rise in unemployment rate," he says.
"In short, we do not see a significant local housing imbalance and view Australia as having had a housing boom rather than having a housing bubble."
So what does Bloxham expect will happen to prices in 2018?
The answer can be found in the table below revealing his expectations for house and unit prices in Sydney, Melbourne and Brisbane, along with dwelling prices in Adelaide and Perth.
"Our forecasts for national housing price growth in 2018 are unchanged since July, with growth still expected to slow from 9% in 2017 to 3-6% in 2018," says Bloxham.
"However, we have revised down our forecasts for Sydney and revised up our 2018 estimates for Melbourne, given recent trends and changes in the population growth estimates.
"We expect housing price growth of 2-4% in Sydney and 7-9% in Melbourne in 2018.
"For the other cities, our 2018 housing prices forecasts are largely unchanged, with low single-digit rates of housing price growth expected to continue."
So many of the prevailing themes seen in the second half of this year -- a slowdown in Sydney and Melbourne and modest growth in most other capitals -- will continue in his opinion.
"The slowdown in Sydney and Melbourne has been driven by a number of factors," Bloxham says.
"First, housing supply has ramped up, as an apartment building boom has delivered new dwellings to market. Second, prudential settings have been tightened, which has also included an increase in lending rates for investors. Third, foreign demand has pulled back, reflecting restrictions on Chinese capital outflows, constraints on lending to foreign buyers by domestic banks and increased local taxes on foreign buyers.
"We expect these factors to continue to weigh on housing price growth in the coming quarters."
For those interested in what Bloxham was forecasting for house prices in 2017 late last year, this link will provide you all the details. All things being equal, it was a pretty good call.