Population increase and demand for housing will ensure growth stays positive in Sydney and Melbourne.
But lending constraints tighten and other measures such as taxes on vacant properties will constrain growth.
The national pace of price appreciation will dip to to an annual 4.4 per cent this year, the ANZ Australian Housing Update says.
Prices will fall in Brisbane next year, however, due to the “significant” volume of new supply.
It tipped home values in Perth and Darwin continue to fall.
Housing markets in Canberra, Hobart and Adelaide will grow slightly faster than the nationwide average through 2018, Fairfax’s Australian Financial Review noted.
“We anticipate that Australia’s housing market will broadly cool from here,” economists Daniel Gradwell and Jo Masters wrote.
“We believe that price growth will slow sharply due to a combination of policy changes and macroprudential regulation.”
The report also predicts housing construction to “gradually soften.”
“We think building approvals could fall by another 5-10 per cent in the next six to 12 months,” the report said.
The two biggest risks remain over-supply of new apartments in Brisbane and “to a lesser extent”, Melbourne as well as settlement failures, the bank said.