Housing market sentiment has lifted sharply across the country, although Vic is still lagging. Confidence also buoyed as property experts again up their expectations for house price growth and rents. NAB has also upgraded its forecasts for dwelling prices, which are now expected to rise 14% in 2021 and 6% in 2022. Lower rates will be a key driver of prices, alongside a strong recovery in the economy and labour market.

Survey highlights

The NAB Residential Property Index climbed to a new survey high +69 pts in Q1 2021. Market sentiment was very strong in all states except VIC – although the state index is now tracking at its highest level since Q1 2020 and well above average. Confidence levels were also more buoyant across the country, led by WA and TAS where expectations for rents and prices are strongest (with improved expectations also recorded in all other states). The survey continues to highlight FHBs as key players in both new and established housing markets and also pointed to increased activity among resident investors. But the role of foreign buyers in local housing markets continued to recede in both new and established markets, with their overall share of sales falling to new survey lows.

The view from NAB

On the back of ongoing low interest rates alongside a significantly better than expected recovery in the economy and labour market we now expect strong gains in dwelling prices of around 14% this year, followed by a more moderate but solid gain of around 6% next year. The upgrade to our forecast is relatively uniform across capital cities – reflecting rates as the primary driver. That said we expect apartment prices, particularly in the largest cities, to lag house prices as a result of weaker population growth. More broadly we expect the economy to continue to recover strongly, but for rates to remain low on the back of low inflation and weak wage growth. Only once spare capacity in the economy erodes and inflation sustainably returns to target, will the RBA begin lifting rates.

For further details please see NAB Residential Property Survey (Q1 2021)