House prices to bottom out in 2012 and start rising from 2013: NAB

Larry SchlesingerDecember 8, 2020

House prices are expected to bottom out later in the year and then starting rising modestly from 2013 led by Western Australia, the latest NAB quarterly residential property market survey has forecast.

National house prices fell 1.3% in the first three months of the year, following a fall of 2% in the 2011 December quarter and a 2.4% decline in the September 2011 quarter, according to the survey of about 300 property market participants, including real estate agents and property developers. 

Those surveyed are forecasting a further 0.2% decline over the next 12 months and then 1.6% growth in 2013 and 2014. 

Western Australia is the “standout for price growth” over the next 12 months, with a 1.3% rise expected. NAB is most pessimistic about Victoria, with house prices forecast to fall 1.5% over the same period.

NSW house prices are expected to remain flat with growth of just 0.4%, and small declines are forecast for SA/NT (-0.6%) and Queensland (-0.2%).

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Over the March quarter stronger outcomes were recorded in all states bar NSW, where house prices fell by 0.4% following a 0.3% decline in the December 2011 quarter. 

Despite the drop, NSW was the second best performing market over the March quarter after WA, where prices fell 0.1% following a 1.4% decline in the previous quarter. 

Prices were significantly weaker in Queensland (-2.4%), SA/NT (-1.9%) and Victoria (-1.8%). 

The national rental market showed little growth over the quarter, with house rents rising 1.1%. It is expected to pick up by 2.9% over the next year and 4.3% over next two years.

There was a wide divergence in rental market performance, with a notable softening in rental markets in SA/NT and a “big turnaround in the rental story in Victoria”.

“With slower population growth and higher construction rates contributing to rising residential vacancy rates in metropolitan Melbourne, Victorian rents fell -0.2% in the first quarter of 2012, compared with a 0.4% increase in the previous quarter. In contrast, rental growth was strongest in WA (2.6%) and NSW (2.2%),” says the report.

National rental growth expectations over the next year softened to 2.9% from a forecast of 3.2%, with growth of 4.3% forecast (previously 4.6%) over next two years. NAB expects rental returns to continue to be strongest in NSW and WA.

While the outlook for rents in WA (4.5%) and Queensland (2.4%) was broadly unchanged, expectations softened in SA/NT (2.6% from 3.7% previously), Victoria (1.5% from 1.8% previously) and in NSW (3.8% from 4.5% previously). 

Expectations softened in all states bar Victoria (2.9% from 2.8% previously), but it remains the weakest state for rental growth overall. Rental expectations over the next two years remain strongest in WA (5.7%), NSW (5.2%) and SA/NT (5%).

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Positive rents and falling home values will continue to support rental yield growth, says NAB. 

The other key findings of the report were:

  • First-home buyers and resident investors less active in the market for new property, but overseas buyer activity increases. Demand for new property still strongest for inner-city houses and low-rise apartments/townhouses. 
  • Tight credit conditions and housing affordability cited as the most “significant” constraints on new housing development. Lack of development sites and construction costs becoming problematic, especially in WA. 
  • Overall demand for existing property improved slightly. Houses still the most preferred type of property, especially in the inner city. Low- and high-rise middle-ring apartments/townhouses are the least preferred option for existing property buyers. 
  • Capital growth expectations remain strongest for existing property in the sub-$500,000 price range. Outlook for premium property remains “poor”. 
  • Access to credit still viewed as the biggest impediment to purchasing existing property but the level of concern is being slowly pared back. Employment security has emerged as the next biggest concern, with Victoria the most pessimistic state.

 

 

 

Larry Schlesinger

Larry Schlesinger was a property writer at Property Observer

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