Below trend growth to continue
Housing market sentiment lifts to a new high and dwelling prices now expected to grow around 19% in 2021 and 4% in 2022.
Housing market sentiment lifts to a new high as house prices and rents continue to grow across the country. But the survey is tipping slower growth in prices over the next 1-2 years, with rents remaining stable. NAB has also upgraded its forecasts for dwelling prices – now expected to grow around 19% in 2021 and 4% in 2022. Low rates and strong income support have seen strong price growth in 2021, but this impact will begin to fade.
Continued strong growth in house prices across the country and further gains in rents lifted the NAB Residential Property Index to a survey high +71 pts in Q2, with above average outcomes reported in all markets. Housing market confidence among property professionals was also elevated but softened a touch. With housing affordability starting to weigh heavily (particularly on FHBs), new NAB research shows government incentives have been only ‘moderately’ significant in helping FHBs get into the market earlier, led by VIC. Rising house prices have had a bigger (negative) impact, particularly in NSW. The survey found FHBs are now also more willing to build or buy new builds now compared to two years ago, especially in the NT and in TAS, but less so in NSW and VIC.
We have revised up our outlook for dwelling prices in 2021 and slightly lowered our expectations for 2022 to now 18.5% and 3.6%, respectively. Faster than expected outcomes in recent months see a higher starting base, and while we see a slowing in the monthly pace of growth from here, we still see solid growth over the next 6 months. The upgrade to our forecast is relatively uniform across capital cities. The better than expected recovery in the economy and labour market alongside very low interest rates has supported the strong rebound in the property market. Affordability constraints will likely begin to bind over the year and see a slowing in price growth as the impact of lower rates fades.
Get all the insights in the NAB Residential Property Survey (Q2 2021)
© National Australia Bank Limited. ABN 12 004 044 937 AFSL and Australian Credit Licence 230686.