The housing market may soften over the next 12 months but prices are unlikely to drop.
Macquarie Bank's latest general economic outlook states that while rising interest rates will see the property market slow over the next year, a dramatic price correction would not be triggered.
The main reason for this, said the report, is the issue of supply. It said while 150,000 houses had been built each year since 2005, the population had grown by more than 350,000 a year.
"The most obvious starting point in addressing the sustainability of house price growth in Australia is the structural supply and demand imbalance," the report said. "Essentially, there are not enough new houses being built to accommodate a rapidly growing population."
The report also commented that very low mortgage arrears rates suggested that Australian households had coped well with current debt levels.
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