NAB Residential Property Index turns positive in Q3’12 as property professionals see downward correction in national house prices slowing. Market expected to recover in the next year, with prices rising 0.4% nationally. Prices to rise in all states except Victoria.

• NAB’s Residential Property Index rose to +4 points in Q3’12 (-8 points in Q2’12). WA the strongest state, butQueenslandimproving rapidly. State index also turns positive in NSW, but still negative in SA/NT andVictoria.Queenslandand SA/NT to be the strongest states in next 2 years.Victoriathe weakest but gaining ground.
• National house prices fell -0.7% in Q3’12 (-1.6% in Q2’12). All states bar WA (0.1%) reported negative growth but the rate of decline slowed in all states.Victoriastill the weakest market (-1.1%). Prices also down inQueensland(-0.8%), NSW (-0.6%) and SA/NT (-0.3%). National house prices expected to grow 0.4% over next year and 1.7% over next 2 years. WA joined byQueenslandand SA/NT as most optimistic states for price growth in next 2 years.Victoriastill the weakest state, but prices to resume growing modestly.
• National rents rise 0.2% in Q3’12 but state performance varies.Victoria(-0.5%) softest market withMelbournehaving highest vacancy rates among capitals. Rents also down in SA/NT (-0.4%), but up in NSW (0.2%),Queensland(0.6%) and WA (1.1%) where influx of transient workers is keeping vacancies low. Property professionals see rents growing 2.1% in next year and 3.4% in next 2 years with rents growing in all states.
• Overseas buyers emerging as important players in the market for new developments. Demand for new property strongest for inner city low rise apartments and townhouses and inner city houses but only assessed as “fair”.
• Tight credit and housing affordability still seen as the main obstacles to new building, but concern also rising over construction costs.
• Lower interest rates and rental growth are boosting local investor demand in the existing property market. Overall demand for existing property is strongest in the inner city and capital growth prospects best in the sub-$500,000 range. Buying activity is much more cautious in the prestige market, with capital growth expectations for that sector considered to be “poor” in both the housing and apartment markets in all state markets.

Employment security has become entrenched as the biggest impediment to purchasing existing property according to our survey panel, especially in Victoria and Queensland. Access to credit also identified as a “significant” impediment to purchasing existing property.

For further analysis download the full report.

• Quarterly Australian Residential Property Survey – September 2012 (PDF 197KB)