- NAB’s quarterly residential property survey showed sentiment among industry professionals is at a 2-year low.
- Amid price declines in Sydney and Melbourne, confidence in those two cities fell to the lowest level on record.
- NAB has revised down its property price forecasts since the most recent survey in April.
National Australia Bank has revised down its house price forecasts, after its quarterly survey showed industry sentiment has fallen to a two-year low.
The bank now expects home values to edge lower in 2019, after forecasting a 0.8% rise across Australia’s capital cities back in April.
The result of the latest survey follow a similar shift in the outlook for house prices by ANZ last month.
“NAB’s view is that the weakness in dwelling prices seen over the past year is likely to persist in 2018 and 2019 – although we expect moderate rather than sharp price falls,” the bank said.
“The declines over 2018 to date have been more significant than initially expected and this is reflected in our revised forecasts for 2018 and 2019.”
NAB’s property index is based on a survey of market professionals, and gauges expectations around capital growth and the rental outlook.
The latest survey revealed a sharp decline of 17 points to a reading of +6 — the lowest level since July 2016.
As has been the case in much of the recent market research, falls were driven by New South Wales and Victoria. Weaker conditions in those two states saw the sub-index for industry confidence fall to the lowest level on record.
“Consequently, property professionals in NSW and Victoria are now the least confident in the country by some margin,” NAB said.
Industry experts expect prices will continue to fall in those two markets. Housing markets in Queensland and WA are forecast to lead capital growth in 2018 and 2019.
“Queensland is expected to lead the country for capital growth in the next 12 months, although expectations were pared back to 0.7% (2.0% in Q1 2018). WA is next best at 0.6% (1.3% in Q1 2018), followed by SA/NT (0.3% vs. 1.8% in Q1 2018),” NAB said.
Apartment prices are also expected to drop in line with house prices in 2018, with steeper falls expected in 2019 led by the ongoing declines in Brisbane:
Respondents also said credit constraints are at the highest level they’ve been for a number of years, amid tighter bank lending standards and increased regulatory scrutiny.
Following declines in 2018 and 2019, NAB expects house prices in the major east-coast markets to level out in 2020. That implies a top-to-bottom decline of 6.5% for Sydney and 2.5% for Melbourne.
“Any further tightening in lending standards or additional changes to government or prudential policy to address affordability or financial stability concerns are likely to have an impact on these forecasts,” said NAB’s chief economist Alan Oster.
In a speech yesterday, APRA chairman Wayne Byres said any additional tightening of lending standards by the banking regulator will be minor in scope.
Elsewhere in the survey, NAB said state-government incentives and a moderation in house prices had helped spur demand from first-home buyers, partially offsetting a reduction in foreign investor activity.
In rental markets, NAB said the outlook remains positive, particularly in Victoria where booming population growth is likely to be the catalyst for low rental vacancy rates.