Australia’s housing market is not in a bubble, says HSBC chief economist for Australia and New Zealand, Paul Bloxham.

House price rises in Sydney and Melbourne have been offset by softer performances in Perth, Adelaide, Brisbane and the regional areas where housing demand has been weak, or supply has been boosted.

The factors attributed to the price boom in Sydney and Melbourne are strong state economies, major spending on infrastructure, demand for housing supported by migration (both international and domestic) and low-interest rates.

“These fundamental factors largely explain the price boom in the biggest cities and, as a result, we do not judge it to be a bubble,” says Bloxham.

Price growth is set to slow in 2018 due to a crackdown on lending, new taxes discouraging foreign investment and expectations the RBA will hike early next year.