NAB has joined a growing chorus of banks and analysts that have revised their house price forecasts upwards from doom and gloom to growth, with the recovery to be led by Brisbane, Adelaide and Hobart.
The major bank is now expecting prices to increase nationally by about 5% in 2021 and 6% in 2022, with the three leading cities to post 7.4% growth in each of the next two years.
Growth in Sydney is tipped to be 4.4% in 2021 and 6.0% in 2022, while Melbourne will be behind at 3.6% and 5.4% respectively, while Perth is higher at 5.0% and 5.8%.
“This change in NAB’s housing market outlook comes after substantial upgrades to our forecasts for near-term activity and unemployment, as well as the fact that activity in the housing market has held up substantially better than we initially expected,” NAB chief economist, Alan Oster said.
“We expect that lower interest rates for an extended period will be a key support to the housing market over the next couple of years, seeing a boost to prices across the country.
“While the deterioration in the labour market would normally weigh on prices, the significant government support has mitigated the rise in unemployment and hit to household incomes. We see the sharp slowdown in population growth due to border closures as the key risk to house prices, particularly for Sydney and Melbourne.”
According to CoreLogic, prices in the capital cities were up 0.2% October, and the research house expects prices may increase by 7% in 2021, with a 10% increase in Sydney and 5% in Melbourne.
Major rival ANZ last week said its previous forecast had proven to be “too pessimistic”, and now predicts price gains of about 9% across the capitals in 2021. Perth would be the strongest performer with a 12% increase, followed by Brisbane (9.5%) and Hobart (9.4%). Sydney and Melbourne respectively are tipped for 8.8% and 7.8% growth.
Index shows improving sentiment
NAB’s Residential Property Survey for the September quarter showed housing market sentiment bounced, but remained weak, taken while major market Melbourne remained in lockdown.
The index recovered to -7 points, having sunk to survey low of -33 points in the June period. A score of 0 is neutral.
The index was weighed down heavily by a deterioration in Victoria – which was the only state to go backwards, to a low -53 – while there was only modest improvement in NSW, from -47 to -16.
Western Australia and South Australia/Northern Territory showed market improvement. WA jumped from -8 to 60, the most positive reading, while SA/NT went from -26 to 24. Queensland also make the crossover from negative to positive, from -9 to 12.
It is another indicator that sentiment in the market is on the up.
Auction clearance rates continued to rise over October and into November despite a surge in listings, reflecting in a sharp revival In Melbourne new seller activity following the easing of a second shutdown.
Confidence bounced in all states except Victoria, where the outlook for both prices and rents are now much weaker than elsewhere.
First home buyer levels rose to new highs in both new and established housing markets as prices softened and interest rates fell at ultra-low levels. FHB owner occupiers were at a survey high of 37.1% in market share in the new property market, and 45.9% in all. Similarly, in the established market, the FHB owner occupier segment reached a record high of 30.6%, up from 24.4%, while FHB investors dipped to 7.9%.
Official data showed dwelling approvals and construction loan commitments surged in September, with owner occupiers loans at historically high volumes, and first home buyer loans showing strong gains, spurred by federal and state government initiatives.