Bond markets have been supported by some market-friendly data and while Fed speakers were again mixed, it was the more dovish remarks that captured attention.
NAB Quarterly Australian Residential Property Survey: Q4 2016
By state, confidence has improved in VIC and QLD relative to the last survey, but this was offset by much weaker confidence in SA/NT and a small fall in NSW
Australian housing market sentiment was steady in the final quarter of 2016 as more positive expectations for house prices were offset by slightly weaker expectations for rents.
The NAB Residential Property Index was unchanged at +15 in Q4, but it varied widely across states.
NSW/ACT (+49) and Victoria (+49) continue to be the clear standouts, with Queensland (+3) coming in a distant third. SA/NT was essentially neutral and WA (-74) extremely negative.
Overall confidence has improved a little, with the Index now expected to rise to +30 in the next year (from +29) and to +33 in two years’ time (from +30).
On average, survey respondents kept their price expectations broadly unchanged at 1.2% in the next year and 1.3% in two years’ time.
Expectations for price growth were scaled back in NSW and Victoria, but they continue to lead the country. In Queensland, prices are expected to accelerate, but remain negative in WA.
During Q4, foreign buyers increased their presence in local housing markets for first time since late-2015, accounting for an estimated 10.9% of new and 7.6% of established property sales – with buyers noticeably more active in Victoria, and less so in Queensland.
NAB’s forecasts on residential prices
NAB Group Economics has lifted its national house price forecasts for 2017 to 3.4% (previously 0.4%). Unit price forecasts were also revised up, to 0.8% for 2017 (was -1.6%).
According to NAB Group Chief Economist Alan Oster: “Solid market sentiment in the NAB Survey and a surprisingly strong price response to lower interest rates in 2016 has prompted us to revise up our 2017 forecasts, given NAB’s expectation for more rate cuts this year.”
“However, we still expect the housing market to cool noticeably in 2017, especially for apartments” added Mr Oster.
There is still considerable uncertainty over the outlook for dwelling prices. In addition to supply concerns, affordability is still a major issue in the best performing markets, while credit conditions have tightened somewhat, especially for foreign buyers and investors.
Considering all of these factors, conditions are expected to soften going forward, contributing to more moderate price growth in the major property markets this year.
“Importantly though, we continue to hold the view that residential property prices are unlikely to experience a severe ‘correction’ without a trigger from a shock that leaves unemployment and/or interest rates sharply higher – a scenario not included in our forecasts” said Mr Oster.
About 250 property professionals participated in the Q4 survey.
For further information, please see the attached document: