Sydney house values to increase by 0.6 percent, units to fall by 0.6 percent in 2016: NAB
The 2015 calendar year saw Sydney home values rise by a total of 11.5 percent, the latest NAB housing insights report has noted.
Strong economic conditions together with high rates of migration have driven the strength in the New South Wales housing market.
Sydney has recorded the highest rate of growth, with home values rising by a cumulative 42.1 percent over the past five years.
While growth in home values across Sydney has been substantial, the second half of 2015 has shown the first signs that Sydney’s strong run of capital gains is losing steam; the final quarter of 2015 saw auction clearance rates slip to the lowest levels since 2012 and home values were down by 2.3 percent over the quarter.
The Sydney housing market has been undersupplied for a number of years, leading to a substantial accumulation of pent up demand. While the undersupply of housing – in conjunction with other factors including strong foreign demand and low interest rates – have been highly supportive of prices, a significant deterioration in affordability is likely to pose more of a constraint on price gains going forward.
NAB has lowered its expectation for house price growth to just 0.6 percent in 2016 (from 11.5% in 2015)
Additionally, a record large pipeline of residential buildings approved for construction is now (and will continue to) help to alleviate the pent up demand for housing that has accumulated over time, reducing a key source of support for the market. Similar to elsewhere, more subdued population growth and tighter credit conditions from prudential regulatory changes will likely slow demand, and may have a particularly large impact on Sydney given the large contribution from investors.
The NAB Property Survey showed that market sentiment weakened considerably in the last quarter of 2015, foreign demand eased off moderately, and participant’s expectations for price gains in the next 2 years were also heavily reduced. Consequently, NAB has lowered its expectation for house price growth to just 0.6 percent in 2016 (from 11.5 percent in 2015). Given the additional headwinds to the unit/apartment market, prices for this type of housing are expected to fall 0.6 percent in 2016.