NAB Residential Property Survey Q4 2016
According to the latest NAB Residential Property Survey for Q4 2016, the housing sentiment was unchanged this quarter, whilst confidence rose slightly. However, it is predicted that property prices in Sydney and Melbourne are set to increase again, although at a much slower pace than last year.
PROPERTY PRICE FORECASTS NAB are predicting that Sydney house prices will rise by 4.5 per cent this year, whilst Melbourne will see a greater rise of 5.6 per cent. In spite of this, the apartment market is suggested to grow at a slower rate by 1 per cent in Sydney, whilst in Melbourne apartment prices will fall 2.7 per cent and 1.8 per cent in Brisbane.
On a national scale, the average house price forecast in 2017 will sit at 3.4%.
The Sydney property market exceeded NAB’s expectations for 2016, and the city saw four consecutive years of double digit price growth, that being 15.2% in 2013, 13.4% in 2014, 11.5% in 2015 and 16.7% in 2016. VIC saw double digit growth in 2015 and 2016 with price growth at 11.7% and 15.1% respectively.
It is believed by NAB’s economists that the two interest rate cuts last year had a part to play in the strength of the property market, even though some capital cities such as Sydney has seen rents for its apartments decline.
NAB predicts that this year interest rates will be slashed yet again by the RBA and hit a new historic low of 1 per cent, from the current 1.50 per cent. If this happens then property prices may continue to rise.
However, a rise in property prices will not help the affordability crisis that is hitting Australia, particularly in Sydney. Wages growth is now at its slowest paces since the 1990s and this is sure to have an effect on the number of buyers in the market. The apartment market is therefore thought to cool down dramatically.
CONFIDENCE Nationally, confidence levels increased slightly, with both VIC and NSW above the national average, whilst WA trailed in last place.
RENTAL EXPECTATIONS Rental expectations across the major capital cities are mixed. Rental growth is expected to strengthen in VIC (1.5% vs 1.0%) and NSW (1.4% vs 1.2%), but remain below house price growth, suggesting that yields will weaken. However, the outlook for two years’ time will see rental growth ramp up to 1.7% for VIC and NSW which is good news for property investors.
FIRST HOME BUYERS Even though property prices are continuing to rise, Q4 saw an increase in the number of first home buyers and owner occupiers in the market which accounted for 19.6% of all new property sales compared to 19.0% in Q3. FHB investors also accounted for 13.5% up from 12.2% in Q3. As a total, FHBs accounted for 33.1% of all new property sales in Q4, up from 31.2% in Q3. This is their biggest share since Q1 2016.
HOUSING DEMAND During Q4, demand expectations for new property improved and this demand is expected to continue across all property types over the next 12 months, except for inner city houses.
NSW is the most optimistic state for inner city high rises and CBD apartments as well as high-rise apartments in the mid-outer ring. Low-rise apartments in the mid-outer ring and inner city of VIC are also expected to see good levels of demand.
THE IMPORTANCE OF FOREIGN BUYERS Foreign buyers are still playing an integral part in Australia’s property market. In Q4, foreign buyers accounted for 10.9% of all new property purchases compared to 10.2% in Q3. This is the highest levels since Q1 2016, despite new laws coming into play to affect foreign buyers and making it more expensive for foreign buyers to purchase property here, particularly in VIC. Interestingly, foreign buyers in VIC were most prevalent with their market share of sales rising from 15.0% in Q3 to 19.3% in Q4. During Q4, approximately 55% of all property purchases made by foreign buyers were for apartments, with 59% of sales in NSW and QLD for apartments.
Approximately 30 per cent of apartments bought by foreign buyers were valued less than $500,000, whilst 45% were valued between $500,000 and $1 million.
The NAB Quarterly Australian Residential Property Survey first launched in Q1 2011 and comprises approximately 250 property professionals for Q4 2016.
Published on 27th of January 2017 by Marty Stanowich