House price growth cooling ahead: NAB

Average house price growth will cool to around 2% to 3% year on year, according to the National Australia Bank’s head of retail banking, Gavin Slater.

“The fundamentals are as good as they get,” Mr Slater said in a Fairfax Media report on the current economic conditions.

Mr Slater said these rates would average 2 to 3% annual growth over the next few years which would increase the Reserve Bank of Australia’s capacity to keep interest rates at a record low.

"We don’t believe we have a housing bubble, but our outlook is that increasing house prices will be more modest than they have been in recent times," he said.

House price growth would be restrained by high levels of household debt and cost of living pressures, Mr Slater said.

“Cost of living pressures will also act as a natural hedge to house price inflation,” he said.

“It is well known that in Australia compared to other OECD [Organisation for Economic Co-operation and Development] countries, household debt as a percentage of gross disposable income is very high and we believe that will act as a natural constraint,” he said ahead of a presentation to the UBS Australian Financial Services Conference in Sydney.