Melbourne Property Market
A suburban street is seen in Geelong February 24, 2014. Reuters/Jason Reed

Even if Chinese demand for houses in key markets such as Sydney and Melbourne has not been dampened by tighter lending rules to foreign borrowers, prices of units in the two Australian cities are expected to go down in 2018. AMP Capitals sees prices dipping between 5 percent and 10 percent.

The forecast by Shane Oliver, chief economist of AMP Capital, was in his latest investor report released on Wednesday. He previously predicted a 15 to 20 percent decline in apartment prices in the two hot housing markets over the next two years, Australian Financial Review reports.

He explains, “Nationwide price falls are unlikely until the RBA starts to raise interest rates again and this is unlikely before 2018, at which point we are likely to see a 5 per cent or so pullback in property prices.” He noted similar downward movement in house prices during the down cycles of 2009 and 2011.

Shane says Sydney and Melbourne would be more subdued and log 10.2 percent and 9 percent annual price hikes in 2016, respectively.

Insurance giant QBE agrees that the housing boom in Sydney is about to end due to loan restrictions and a large number of new property developments which would depress prices. QBE foresees median house prices in Sydney remaining broadly flat until 2019 after it registered a 56 percent jump since 2012.

While the unprecedented housing boom has been boosted by the record-low interest rates set by the Reserve Bank of Australia, a growing population and supply shortage, at the same time, it locked young people out of the market. Pressure from the regulator led to tighter lending standards for property investors to avert a bubble.