Quarterly Australian Residential Property Survey – Q4 2014
NAB Residential Property Index falls as house price expectations pared back and rents weaken. Sentiment softer in all states (and still deeply negative in WA). Almost 10% of all property is being purchased by first home buyers as an “investment”.
NAB Residential Property Index falls as house price expectations pared back and rents weaken. Sentiment softer in all states (and still deeply negative in WA). Almost 10% of all property is being purchased by first home buyers as an “investment”. Foreign buyers less active all states except Victoria (1 in 3 of all new property sales). Over half of all transactions by foreigners are apartments, one-third houses and the balance re-development. Around 70% of all foreign purchases are for properties valued at less than $1 million; 5% in excess of $5 million.
The NAB Residential Property Index fell -7 points to +12 points in Q4, and is now below its long term average of +14 points, with sentiment lower in all states.
NAB Group Chief Economist Alan Oster said “NSW overtook Queensland as the strongest state in Q4, but Queensland and Victoria were the most optimistic looking forward, with WA the least optimistic by some margin.”
The outlook for house prices over the next 1-2 years was pared back in all states, while mildly stronger expectations for rental growth in Victoria and Queensland masked softer outlooks in NSW and SA/NT.
Foreign buyers in new property markets were less active in all states, except Victoria.
“Foreign buyers accounted for 14.8% of total demand for new property in Q4, down from 16.8% in Q3. In Victoria, however, they accounted for a new high of 32.5% of total demand, or 1 in 3 all new property sales” said Mr Oster.
New survey questions show that around 53% of all foreign purchases were for apartments, 31% for houses and 16% for houses or land for re-development. There were however some significant differences between states.
According to Mr Oster: “Apartments made up just 44% of all purchases in Victoria, compared to between 54-57% in the other states, with foreign buyers purchasing more houses in Victoria (38%) than any other state.”
Around 40% of foreign purchases were for properties valued between $500,000 to less than $1 million, and 29% for properties valued less than $500,000. Around 5% of all sales were for premium property valued above $5,000,000.
For the first time, the Survey also distinguishes between first home buyers purchasing for owner occupation and investment purposes.
“The results indicate that first home buyers purchasing for investment purposes accounted for almost 8% of total new property demand and just over 9% in existing property markets. This suggests that affordability constraints or potential capital gains are encouraging some first home buyers to delay moving in to their first homes” said Mr Oster.
The survey identified housing affordability, construction costs and a lack of development sites as the biggest constraints on new housing developments in the country, while employment security and price levels were the biggest impediments to buying an established home.
NAB Economics’ expects house prices to moderate because of rising unemployment, sluggish household income growth, affordability concerns, cost of living pressures and high levels of household debt, although two further interest rates cuts this year should help support house prices a little more than previously expected.
“We are forecasting average house price growth of around 4% over the year to end-2015 and 2% over the year to end-2016”, said Mr Oster.
Individual state reports for NSW, Victoria, Queensland, WA and SA/NT providing a more comprehensive review of the survey results for each market are available on request.
For further analysis download the full report.