Australian housing market sentiment has hit a record high, with NAB’s Q4 2013 residential property survey finding more demand from local and foreign investors.
NAB’s residential property index rose 4 points to 36 during the quarter, reaching its highest level since the survey began in 2010.
Interestingly, Australians appear to have remained level-headed about the capital gains of the past year, with the survey finding the “outlook for prices softer and now tipped to rise 2.9% in next year (3.3% previously) and 3.7% in following year (4.5% previously).”
That is great news for the structure of the economy and highlights that bubble conditions are not yet forming.
However, economic theory tells us the marginal player sets the price and it is investors and foreign investors who are driving prices higher according to the NAB.
Investors – both domestic, who “played a bigger role in (the) new property market in Q4, especially Queensland”, and foreign – continue to be a big portion of buyers in the market.
This might be good for prices but it also crowds out buyers who either can’t claim a tax incentive or who don’t have the benefit of foreign capital to invest.
It is one of the reasons that first home owners only just this month climbed of the all time low of 12.3% of all new loans to a still tepid 12.7%.
There is always good and bad in rising house prices.