House prices are cooling off in Sydney and Melbourne but could rise again as the pace of new home building slows, a report has warned.
Purchasing a home in the two major capitals also remains out of reach for many Australians despite prices easing.
The housing affordability report, from property researcher CoreLogic and community housing body PowerHousing Australia, found home prices are trending lower in most capitals as building has hit record levels.
More than 221,000 new dwellings were built in the past year alone.
But the rate of construction is expected to slow down, with the number of new homes built set to fall by up to 50,000 each year.
That would mean 20,000 fewer homes built across the country each year than the 195,000 needed to meet future demand.
Such a downturn could push prices up, even as CoreLogic expects the market will remain relatively soft.
PowerHousing Australia chair Nicola Lemon says more must be done to tackle the shortage of affordable housing in Australia.
"A concerted effort is needed by all levels of government to help first home buyers, key workers and moderate income earners find housing solutions," she writes in the report.
"Equally, a significant effort is required to ensure low and very low income earners have appropriately located, secure and decent housing."
The establishment of the federal government's National Housing Finance and Investment Corporation in July was a good start, Ms Lemon said.
The corporation aims to provide long-term, low-cost finance to support more affordable rental housing.
The report, which looks at the factors influencing affordable housing for low income earners in 2018-19, has laid bare the extent of price rises in recent years.
Just 2.5 per cent of houses purchased in Sydney in 2017-18 cost less than $400,000, compared to 25 per cent of all homes in 2011-12.
In Melbourne, 2.7 per cent of houses hold were cheaper than $400,000 in the past year, while only 2.4 per cent came under that level in Canberra.
Growing underemployment and slow wage growth are among the factors making it difficult for people on low to middle incomes to compete in the property market, the report says.
That comes as the social housing sector is stretched, with around 189,400 people on waiting lists for such properties.
