Confidence among property professionals has 'collapsed'

Elena Corral / EyeEm
  • Confidence among Australian property professionals fell to the lowest level in seven years in the September quarter.
  • Confidence among those respondents based in New South Wales hit record lows.
  • An increasing number of respondents see prices falling faster in the year ahead compared to forecasts offered three months ago.

Confidence among property professionals in New South Wales and Victoria has “collapsed,” dragging overall sentiment across the country to the lowest level in seven years, according to the National Australia Bank’s (NAB) September quarter Residential Property survey.

“The NAB Residential Property Index fell sharply for the second straight quarter, down 15 points to a seven-year low -9 points, the first negative read since mid-2012,” the NAB said.

“Sentiment was dragged lower by big falls in New South Wales and Victoria, which offset gains in Queensland which was the only state to report a positive result.”

As seen in the chart below from the NAB, overall sentiment levels in New South Wales fell to the lowest level in the eight-year history of the survey. The news was similar in Victoria where confidence slumped to the lowest level in seven years.

Based on survey responses, there were also a larger number of pessimists in South Australia and the Northern Territory, as well as Western Australia, albeit by only a slim margin.

NAB

The NAB said the national result largely reflected that property professionals in New South Wales and Victoria scaled back their outlook for prices in the last three months, particularly in Victoria where house price falls are now expected to be significantly larger.

“Average survey expectations for national house prices for the next 12 months were cut notably in Q3, and are now tipped to fall 1%, larger than the 0.5% decline tipped three months earlier,” the NAB said.

This was largely due to big downward revisions in Victoria where house prices are tipped to fall by a much bigger 2.4%, down from 1.1% in Q2, and also by an expected decline of 2.4% in New South Wales, again larger than the 2.1% slide seen three months earlier.

NAB

Over the past year, prices in Sydney and Melbourne, the state capitals of New South Wales and Victoria, have fallen 6.2% and 3.7% respectively, according to data released by CoreLogic.

Year-to-date, prices have fallen faster in Melbourne, likely impacting the sharp deterioration in sentiment seen in the latest survey.

Like the broader view of property professionals, the NAB is forecasting that prices will continue to fall over the next 18 to 24 months, led by continued declines in Sydney and Melbourne, especially for apartments.

“Weakness in dwelling prices will continue to be driven by Sydney and Melbourne, particularly apartments, although it’s likely Brisbane and Perth will also contribute,” it says, adding that it expects values in Sydney and Melbourne falling 10% and 8% respectively peak-to-trough.

“This reflects a bigger fall than previously expected but would still leave house prices well up on 2012 levels.”

NAB

However, unlike more pessimistic forecasters, the NAB doesn’t see a risk of a disorderly collapse in prices.

“We see this as a healthy correction which will help offset some of the risk in the household sector against a backdrop of a relatively healthy economy and labour market,” it says.

“Our central scenario does not include a credit crunch event leading to disorderly falls in house prices.”

The NAB said over 300 property professionals participated in the September quarter survey.

NOW READ: Demand for banking and real estate workers in Australia is plummeting

NOW WATCH: Money & Markets videos

Business Insider Emails & Alerts

Site highlights each day to your inbox.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.