NAB latest to backflip on forecasts, predict 5% gains in 2021
NAB are the latest bank forced to backflip on their dire house price forecasts.
Nationally NAB expect rises of around five per cent over 2021 and six per cent over 2022, with house price growth likely to be stronger than the apartment sector.
The best gains are expected in Brisbane, Adelaide and Hobart, all predicted to rise 7.4 per cent, followed by Perth at five per cent.
They are expecting weaker returns from Australia's two biggest housing markets in 2021 compared to the rest of the nation's capitals.
"We see the sharp slowdown in population growth due to border closures as the key risk to house prices, particularly for Sydney and Melbourne." NAB's Q3 2020 update suggested.
NAB's report, headed by their group chief economist Alan Oster, says Melbourne's house prices will grow 3.6 per cent, compared to Sydney's 4.4 per cent over 2021.
They expect further gains in 2022, with Sydney house prices to rise six per cent and Melbourne 5.4 per cent.
NAB's Q3 2020 forecast
In a sign of how well the housing market has weathered the COVID pandemic, the forecast is a stark contrast to the forecasted figures just three months ago in the Q2 update.
NAB had predicted prices in Sydney to decline -4.9 per cent and -6.5 per cent in Melbourne in 2021, following 2020 declines of -4.7 per cent in Sydney and -7.3 per cent in Melbourne.
The forecast saw all capital city housing markets decline in 2021, with the average decline across the capitals predicted to be -4.3 per cent.
NAB's Q2 2020 forecast
"This change in NAB’s housing market outlook comes after substantial upgrades to our forecasts for near-term activity and unemployment, as well as the fact that activity in the housing market has held up substantially better than we initially expected," the report read.
"We expect that lower interest rates for an extended period will be a key support to the housing market over the next couple of years, seeing a boost to prices across the country.
"While the deterioration in the labour market would normally weigh on prices, the significant government support has mitigated the rise in unemployment and hit to household incomes"
NAB advised that housing market sentiment had bounced in Q3, but remains weak, noting the deterioration in Victoria amid stage four lockdown in Melbourne and only a modest improvement in New South Wales.
Victoria was the only state to go backwards in the NAB Residential Property Index, which recovered to -7 points from a survey low of -33 points in Q2. Victoria fell -3 points to a new survey low -53.
"Confidence bounced in all states except VIC, where the outlook for prices and rents is now much weaker than in other states," NAB advise.
"With prices softening and interest rates at ultra-low levels, first home buyer levels rose to new highs in both new and established housing markets.
"But coronavirus and border closures may have further impacted foreign buyer numbers, with their numbers halving in VIC and all but disappearing in NSW."