Expectations weaken for house prices and rents

NAB chief economist Alan Oster said NSW overtook Queensland as the strongest state in the fourth quarter.

Queensland and Victoria were the most optimistic, while Western Australia was clearly the least optimistic.

First home buyers purchasing for investment purposes accounted for almost eight per cent of total new property demand and just over nine per cent in existing property markets.

"This suggests that affordability constraints or potential capital gains are encouraging some first home buyers to delay moving in to their first homes,” Mr Oster said.

NAB expects house prices to moderate due to rising unemployment, sluggish household income growth, affordability concerns, cost of living pressures and high levels of household debt.

However, the bank said two further interest rates cuts this year should help support house prices a little more than previously expected.

“We are forecasting average house price growth of around four per cent over the year to end-2015 and two per cent over the year to end-2016,” Mr Oster said.

[Related: Brokers shown how to prepare for possible downturn]