Below trend growth to continue
NAB Residential Property Index rises to survey high in Q1, but confidence shaken by Coronavirus impact on economy.
The trend in NAB’s Residential Property Index for the March quarter remained positive, with the Index rising 4 points to a survey high +38 to remain well above average (+12). Confidence however moderated, perhaps reflecting early fears regarding the Coronavirus impact on housing markets. It is important to note the survey was conducted between 25 February and 23 March 2020, prior to more restrictive social isolation measures, and bans on open homes and on-site auctions. It is unlikely to reflect sharp falls in consumer and business confidence, economic activity and employment evident since then, which is likely to impact house prices moving forward. Consequently, we expect sentiment and confidence to be much lower in the June survey.
The View From NAB:
Our view is that dwelling prices will likely see significant falls over the next 12-18 months. We expect house prices across the capital cities to fall by 10-15%. While both the depth and duration of the downturn underway remain uncertain – and will depend on the evolution of the spread of COVID-19 – we expect a sharp fall in economic activity in the near-term, followed by a rebound in growth but slower recovery in activity levels. Consequently, we see a sharp rise in unemployment to 11.7% by mid-year and partial recovery to 7.3% by end 2021. While interest rates are very low and will act to support prices, rising unemployment, slower wage growth and weak confidence will weigh on prices. Also, while we do not see a fundamental over-supply in the market (with construction continuing to decline), a slowing in migration will see demand for housing soften somewhat.
For further information, please see the attached NAB Residential Property Survey Q1 2020
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