Brisbane and Sydney to lead 2015, but growth to lag: NAB

The latest NAB Residential Property Index for the third quarter of 2014 was unchanged overall. But it seems some capital cities are doing far better than others with the increasing presence of foreign buyers an the emerging theme.

NAB Group chief economist Alan Oster said while the overall index remained unchanged, Queensland has now overtaken Victoria as the strongest state, and South Australia and the Northern Territory were the big improvers.

While the outlook for national house prices in the next two years improved across the country, rental growth is expected to be subdued and heading backwards in all states except South Australia and Northern Territory.

NAB Economics’ analysis expects house price increases to be more modest in coming months, as a result of rising unemployment, sluggish household income growth, affordability issues and cost of living pressures.

"We are forecasting average house price growth of around 4% through the year to September 2015 and 2% through the year to September 2016," said Oster.

"Brisbane and Sydney are expected to lead the market in the next year, followed by Melbourne and Adelaide, with Perth lagging."

With sentiment continuing to fall in Western Australia, now at an all time low, there was also a recorded significant pick up in foreign buying activity for new property, particularly in Victoria, with predictions that it will continue. Foreign buyers account for one in six purchasers across the country, and one in four in Victoria.

"Foreign buyers accounted for 16.8% of total demand for new property in Q3, or about one in six of all buyers, with this share tipped to rise to 17.3% over the next year. Foreign buyers were more active in all states, but especially in Victoria where they accounted for an estimated 24.8% of total demand, or on in four all new property sales," said Oster.

The biggest constraint on new housing developments across the country continued to be housing affordability. Meanwhile, employment security remained the biggest impediment to buying an established home.