Residential sentiment may have passed its peak: NAB survey

The NAB Residential Property Index has dipped in Q3 from a survey high in Q2. 

"With market data showing house prices slowing, sales easing, and building approvals falling, the survey is also pointing to a market that has passed its peak," the latest industry wide survey suggested.

Sentiment softened in most parts of the country and was still lowest in Victoria.

While confidence fell again, it was still above average.

With the survey expectation for house prices in the next 12 months to outpace rents, gross yields should fall before levelling out in two years’ time as prices and rents rise at a similar pace, the latest update noted, while some states (WA, the NT and ACT) may see yields rise. 

"With strong building demand and shortages of materials reportedly causing building costs to rise strongly, construction costs surpassed a lack of development sites as the biggest impediment for new housing development," the report noted.

In established markets, property professionals identified a lack of stock as the biggest constraint facing buyers in all states. 

The survey also found that though foreign buyers are still bit players in local housing markets, a significant net number of property professionals now expect their market share to rise in the next 12 months, especially in new residential markets.

"We have slightly revised up our forecast for dwelling prices in 2021 based on stronger than expected outcomes in recent months as well as small upgrade to our expectations for Q4 and early-2022," Alan Oster,the NAB chief economist suggests.

 Overall, that sees a very strong rise in house prices in 2021 but a sharp slowing in 2022 as the impact of lower interest rates fades and affordability constraints begin to bind. 

"Our outlook is generally similar across states, but the relative performance in the year to date sees Sydney and Hobart print very strong outcomes, with Melbourne and Perth seeing softer (but still strong) outcomes," he said.

"Overall, the property market held up remarkably well despite the disruptions to the economy with strong support provided by policy makers and little labour market fallout through the pandemic."