NAB Residential Property Index rises in Q4’12 as the rate of decline in national house prices slows and rents grow. Property professionals expect mild house price gains in the next 1-2 years, with expectations for capital gains highest in WA and weakest in SA/NT.

• NAB’s Residential Property Index rose to +8 in Q4’12 (+4 in Q3’12). WA (+41) the stand-out state, with Victoria (-15) and SA/NT (-20) negative. National index to climb to +49 points by Q4’13 and +61 points by Q4’14. WA to out-perform by some margin followed by Queensland. Victoria next best market in 2 years with SA/NT weakest.
• National house prices fell -0.6% in Q4’12 according to the survey. Prices fell in all states bar WA (0.4%). Biggest fall in Victoria (-0.9%). Mild recovery forecast next year (0.9%), led by WA (2.2%). SA/NT (0.4%) replaces Victoria (0.6%) as weakest state. National prices to rise 2.1% by end-2014, led by mining states.
• NAB modelling indicates average house prices will grow around 1½% through year to end-2013 and 3% to end-2014 – slightly above survey forecast. Price growth strongest in Perth (3½% in 2013 and 5% in 2014). Adelaide (0.1% and 2%) and Melbourne (0.4% and 2%) weakest markets. See Appendix 1 for details (page 7).
• National rents rose 0.4% in Q4’12 but wide variance between states. Rents grew fastest in WA (1.9%) but fell in SA/NT (-1.4%) and Victoria (-0.2%). National rents to grow 2% in the next year and 3.3% in the next 2 years. Rental market strongest in WA as rapid state growth underpins record migration and strong tenant demand.
• Owner occupiers the biggest players in new property market but first home buyers also more active, especially in WA. Overseas buyers also prevalent with Chinese buyers reportedly fastest growing segment of this market.
• Demand for all new property types improved in Q4’12 but still assessed as only “fair”. Demand for most property types expected to strengthen in the next 12 months led by inner city.
• Survey respondents cited tight credit conditions as the most “significant” constraint for new housing development. Concerns over housing affordability are falling slowly as interest rates fall but are still “significant”.
• Demand for existing property weaker in all locations and all property types in Q4’12. Property professionals see “good” capital growth prospects in the sub-$500,000 market next year. Outlook for premium stock still “poor”.

With the domestic economy presently in a soft patch and the labour market weakening, employment security has entrenched as the biggest impediment to purchasing existing property in all states. Access to credit also seen as a “significant” impediment to purchasing existing property.

For further analysis download the full report.

• Quarterly Australian Residential Property Survey – December 2012 (PDF 220KB)