Supply of new detached homes have also caught up with demand, further suppressing price rises, Moody's Analytics said.

While apartment prices were generally accepted as being more volatile given its higher trade among investors, Moody's Analytics said however detached house prices had in fact been more volatile since 1990.

But the lull in Sydney would not last long and detached house prices will rise again by 0.9 per cent in 2019 while apartment prices go up by 1.6 per cent.

"Housing values have risen even faster and are overvalued relative to equilibrium value. Therefore, Moody's Analytics expects a correction across NSW," the report says.

"By 2019, the correction is expected to have largely passed."

"An even sharper run-up in house values for Sydney Eastern Suburbs is leading to our forecast of a 9.3 per cent decline in values in 2018 and a further 3.9 per cent decline in 2019, which would bring house values back to their level in 2016."

Outside Sydney, demand for housing had risen due to cheaper prices in areas like the Central Coast and so would likely enjoy a 4.1 per cent rise in prices in 2018.


Melbourne's house prices however would continue to rise moderately due to a robust local economy, and strong inflows of interstate and overseas migration.

Detached house prices in greater Melbourne will rise 3 per cent and 0.9 per cent in 2018 and 2019 respectively. Apartment prices will rise even more for Melbourne, going up 5.2 per cent in 2018 and 2.2 per cent in 2019.

That said, the growth will pale in comparison to conditions in the recent five-year boom.

"Although the Victorian housing market has benefited from very favourable conditions in recent years, a combination of slower population growth, higher interest rates, and slower income gains will cause house value growth to slow markedly or an outright correction," Moody's Analytics said.

"This is especially the case for Greater Melbourne, where [detached] house values are expected to rise 3 per cent this year and have a modest 0.9 per cent in 2019, down from 12.5 per cent in 2017."

House values across Brisbane were expected to gain 1.8 per cent in 2018, with strength in West Brisbane and Inner Brisbane offsetting declines in South Brisbane and Logan-Beaudesert areas, the report added.

The report also supported a possible rise in apartment values in the Brisbane CBD, driven by recovery in North Brisbane apartment values.

Perth house prices will continue to fall another year before a recovery in 2019.

Another interesting forecast was the recovery of the Sunshine Coast's housing market, which has improved 32 per cent since a slump in 2012. Housing values are forecast to rise 4.4 per cent in 2018, followed by 2.1 per cent in 2019 as the popular coastal areas unemployment drops.