The Australian housing market is gathering momentum, according to NAB’s latest Quarterly Residential Property Survey.
The uptick in activity in recent months was also reflected in NAB’s Residential Property Index, which moved back into positive territory for the first time since mid-2018.
Overall, the Index rose 26 points in the September quarter to an above-average +18.
Market sentiment improved in all states except WA, which was the only state to report a negative index reading. Sentiment lifted sharply in Victoria, to be the highest in the country by some margin.
NAB Chief Economist Alan Oster said that expectations for national house prices for the next 12 months are also positive for the first time since the first quarter of 2018, with prices expected to strengthen moving into 2021. Property professionals in all states except WA expect to see positive gains in the next year, with Victoria and NSW leading the way.
In other key survey findings, the outlook for house prices has caught up with rents for the first time since the September quarter 2017, suggesting the period of yield improvement is coming to an end.
In an environment of stabilising house prices, falling interest rates and an easing in macro-prudential safeguards, the survey pointed to an increasing (albeit still below average) number of investors in both new and established housing markets.
“That said, tight credit was again called out as the single biggest constraint on new housing development, and access to credit the biggest impediment for buyers of existing property across the country”, Oster cautioned.
NAB’s view is that prices have bottomed and will rise over the rest of 2019 and through 2020, led by increases in Sydney and Melbourne.
Overall, it is expected that house prices will end the year 1.8 per cent higher in Sydney and 0.7 per cent higher in Melbourne, with mixed outcomes across the other capitals. We expect moderate growth across the capital cities of 4.5 per cent in 2020.
Despite the stabilisation in prices, the activity side of the market is likely to remain weak, with investment expected to decline relatively sharply over the next few quarters – though from a high base.
While the pipeline of work to be done remains high, it is likely this will be quickly eroded with high rates of work done. Building approvals have continued to trend down, suggesting little replenishment to the flow of new work, the report concluded.