Capital city house price forecasts have been slashed by property research and advisory firm SQM Research, with only Perth, Adelaide and Hobart escaping downgrades.

Price estimates have been cut in five of Australia’s eight capital cities, with Sydney’s forecast dropped to between -4 per cent and zero per cent growth this year, from a previous estimate of between 4 per cent and 8 per cent.

Melbourne property prices are expected to finish the year between -3 per cent and +1 per cent from where they started, significantly below the previous 7 per cent to 12 per cent expectation.

(Source: SQM Research)

The previous forecast was delivered in October 2017, but SQM has noted “leading indicators such as auction clearance rates, total aggregated property listings and asking prices suggest further deterioration in market conditions in recent weeks”.

The group does not expect a general housing price crash this year, but pointed to moves by the macro-prudential regulator, APRA, to strengthen mortgage markets as weighing on the national property market.

“The evidence now suggests that action to reduce borrowings risks is now affecting the national housing market as a whole,” SQM, which is owned and operated by analyst Louis Christopher, said.

“This action, predominantly targeted at property investors, has triggered a decline in demand for residential property.”

Since 2014, the Australian Prudential Regulation Authority has introduced several measures aimed at reducing risks in the mortgage market – investors and interest-only lending have been key targets.

The number of investor and interest-only loans written by major banks fell sharply as a result, and experts see a major recovery as unlikely in the near term.

And while APRA removed its cap on investor lending on April 26, UBS economists argue the move “suggests a more rapid tightening of lending standards than our base case outlook”, with the regulator preparing the market for more permanent measures focused on responsible lending.

“This raises the risk of a material negative impact on housing and the economy,” UBS economists George Tharenou and Carlos Cacho wrote in reaction to the move from the regulator.

SQM sees property price falls as likely for Sydney this year, and points the finger at APRA.

“SQM Research believes the Sydney housing market may now record price declines for the year or at best, very small price gains, assuming property investors do come back to the market at a slow rate following the recent APRA announcement,” Mr Christopher wrote.

The new forecasts assume no further action from APRA this year and no moves to the official RBA cash rate.

Last month ANZ economist noted the sharp fall in investor numbers since APRA began clamping down on mortgage borrowing, but still expects national property markets to grow 2 per cent in 2018 and another 4 per cent the following year.