However, National Australia Bank's quarterly residential property survey, issued yesterday, said those expectations had dropped from the 5.1 per cent growth recorded in the last report to 2.9 per cent.

''Australian house price expectations for the next 12 months have slipped significantly, with the national average now sitting at 1.4 per cent, down from 5.2 per cent recorded in the March quarter,'' it said.

It predicted that homes worth less than $500,000 would ''outperform the market'', but prices would fall for those worth more than $2million.

The report comes a day after an Australian Property Monitors report found the territory had the second-strongest housing market in the country, with the annual rise in median house prices topping 16 per cent. The average house price increased almost 2 per cent on the March quarter to $568,520.

CommSec chief economist Craig James said yesterday the sharp rise in home prices appeared to be a concern at face value.

''But we are looking back at more buoyant times. In the last few months, auction clearance rates and home prices have softened in response to a combination of more home building and higher interest rates. There are good reasons to expect the annual growth rate of home prices has peaked,'' he said.

However, he said housing supply was still not keeping up with demand in many parts of the country, helping keep prices rising.

''Home prices are likely to grow at a more sedate pace over the coming year, causing investors to focus on greater diversity of their investments,'' he said.

The NAB report said investors were expected to make up about 30per cent of the purchases over the next 12 months. Owner-occupiers would buy about half the properties, first-home buyers would get 13 per cent and foreign buyers would take the other 9 per cent.

For more, pick up a copy of today's Canberra Times