This article is from the Australian Property Journal archive
FOREIGN buyers’ appetite and the residential property market have cooled rapidly, prompting experts to downgrade the house prices growth forecast to just 1% whilst apartment prices are projected to decline across all capitals.
According to NAB Group chief economist Alan Oster, “Weakening fundamentals have already seen the market starting to cool, suggesting the best of the price gains are probably behind us,”
The NAB’s Residential Property Index fell to its lowest level since mid-2012 as the slowdown in house price growth continued.
The index fell to +1 in Q4 compared to +10 in Q3 and now sits well below its long-term average of +13.
NAB has lowered its average forecast for national house prices for 2016 to 1%, with expectations softer in all cities – led by Sydney and Melbourne.
Queensland, is predicted to be the best state for capital growth (1.9% & 2.7%), followed by Victoria (0.7% & 1%). NSW is expected to be flat in the next 1-2 years, with weak growth also tipped for SA/NT (-0.6% & 0.2%) and WA (-0.5% & 0.6%).
“Market sentiment continued to weaken in most states, particularly in NSW and Queensland. Sentiment also fell in Victoria, but it has replaced NSW as the strongest overall and is currently the only state tracking above its long-term average. Sentiment fell further in SA/NT and remains very weak in WA,” Oster said.
NAB has also for the first time published its forecast for unit/apartment prices in this report.
The outlook for unit prices also points to flat to falling apartment prices across all capitals.
Oster said going into 2016, credit restrictions on investors, worsening affordability in Sydney and to a lesser extent Melbourne, and a large existing pipeline of residential construction, especially in the apartment market, should see average national house price growth slow to just 1% compared to 2.3% previously, with weaker expectations in all capital cities – particularly Sydney and Melbourne.
“Aside from the strong supply response in the apartment sector, a greater reliance on foreign buyers adds a degree of unpredictability to the outlook, both positive and negative.
“With the bulk of new supply going into large apartment blocks, negative price pressures will be stronger for this market, particularly in Perth and Melbourne. Consequently, NAB expects average national unit prices to fall 1.2% over 2016, with flat to falling apartment prices in all capital cities,” he forecast.
The latest survey also found local investors were less active in both new and established property markets. This was particularly apparent in established housing markets, where their share of total demand fell to a survey low 19.2%, from a survey high 25.2% in Q3’14.
At the same time, foreign buyers activity waned, accounting for 14.4% of all new property sales compared to 15.7% in Q3 and 8.6% in established markets, down from 9% in Q3.
Activity weakened in most states, except Queensland, where foreign buyers accounted for 20.9% of new property sales (17.7% in Q3) and 8.9% of established properties (7.6% in Q3).
In contrast, foreign buyers were notably less active in Victoria, where their share of total new property sales declined to 16.4% from 25.2% in Q3. In established markets, it fell to 8.6%, down from a record high 15% in Q3’15.
There was less change in foreign buyer activity in NSW – 11.7% for new property (13.6% in Q3) and 9.4% in established markets (9.7% in Q3).
Australian Property Journal
