The recent rapid increase in house prices will begin to cool off a little over the next year, the NAB Economics team predicted this week.
NAB’s Residential Property Index, a quarterly report on the state of the residential property market, remained unchanged in the third quarter 2014 with a mixed picture across country.
The report showed that Queensland has overtaken Victoria as strongest state yet the biggest gains were reported in South Australia and the Northern Territory, with sentiment continuing to fall in Western Australia.
NAB Economics predicts average capital city house prices will cool to around 4 per cent over the year to September 2015 and around 2 per cent in the following year.
Brisbane and Sydney are expected to lead the market for capital growth over the next twelve months (growing by 5.9 per cent and 4.5 per cent respectively), followed by Adelaide (3.8 per cent) and Melbourne (2.8 per cent), with Perth (1.7 per cent) lagging somewhat.
In the following year to September 2016, the best cities for capital gains are likely to be Brisbane (3.5 per cent), Adelaide (2.3 per cent) and Sydney (2.2 per cent), with house prices likely to rise 1.6 per cent in Melbourne and 1.1 per cent in Perth.
There was a big pick-up in foreign buying activity in new homes (especially Victoria) and it’s being tipped to rise further. Foreign buyers now account for 1 in 6 new properties nationally (1 in 4 in VIC).
Local investors, however, remained broadly unchanged at 25 per cent. They were found to be most active in QLD, NSW and VIC with a market share of 28 per cent in each state, and least active in SA/NT (20 per cent) and WA (17 per cent).
Foreign buyers were slightly more active in established property markets in Q3, with their share of total national demand rising to 8.2 per cent (from 7.2 per cent in Q2). Foreign buyer demand for established property increased in all states except NSW. Victoria led the way, with foreigners accounting for a record high 11.5 per cent of established property demand.
In contrast, expectations for rents continue to be wound back, with average national rents now expected to grow just 0.7 per cent next year (1.1 per cent in Q2).