Momentum in the housing market seems to have regained pace in recent months, according to new research released this week by NAB.
The Spring Edition of NAB’s quarterly Housing Market Report shows a sharp rise in 6-month annualised growth in home prices, especially in Sydney and Melbourne.
While there are potentially numerous drivers behind this renewed strength, it is likely that the RBA’s recent interest rate cut (in early August) has been a key factor. Investor credit has been picking up again and growth in mortgages for owner-occupiers has stayed solid, although the report suggests that supply side factors also appear to be at play.
Nonetheless, consistent with rising prices, NAB’s Residential Property Survey points to a notable improvement in conditions in the September quarter. The biggest improvements were seen in NSW and Victoria, although Queensland increased as well.
Despite that, the survey suggests tighter conditions imposed on foreign buyers are having an impact, with the share of foreign buyers of both new and existing property easing again in the quarter; Victoria saw a particularly large drop in foreign buyer activity for new homes.
Survey respondents have upgraded their price expectations again for the next 1-2 years, with Queensland the only exception. NAB’s average national house price forecast for 2016 has been increased to 7.9 per cent, from 5.1 per cent. Unit price forecasts are also higher, at 5.2 per cent, up from 3.6 per cent previously.
Fundamentals are expected to shift after that, with house prices growth to be relatively subdued at 0.4 per cent in 2017, while large additions to supply are expected to contribute to a decline in unit prices of 1.6 per cent. The timing of the shift is uncertain, however, and two anticipated interest rate cuts by the RBA in 2017 may delay the moderation in prices.
The report is available for download from the NAB Business website.