Confidence in the housing market remains strong, according to a new report released by NAB Group Economics.
The NAB Residential Property Index shows that while confidence eased back in the fourth quarter of 2021, it continues trending well above average. Not surprisingly, due to repeated lockdowns in the state, sentiment was lowest in Victoria despite an uplift.
NAB’s Quarterly Australian Residential Property Survey Q4 2021 of property professionals around the country found that confidence levels are now highest in the Northern Territory and ACT, and lower in Tasmania, Victoria, NSW and Queensland.
With recent data pointing to further softening in the monthly rate of price growth, the average survey expectation for national house prices in the next 12 months has been revised down. Lack of stock and price levels were identified as the biggest impediments for buyers of established housing, with credit access and rising interest rates also becoming more problematic, particularly in NSW and Victoria.
The outlook for rents improved, lifting in all states except Queensland and Tasmania. Property professionals again singled out construction costs as the biggest constraint on new housing development in the country in the final quarter of 2021.
In established housing markets, buying activity was dominated throughout 2021 by resident owner-occupiers. In the fourth quarter, their overall market share was unchanged at 43.3%, but below the survey average (46.3%). Owner occupiers accounted for the biggest share of sales in all states, but ranged from 57.1% in WA and 52.5% in South Australia to 38.5% in NSW and 40.2% in Victoria.
The overall share of first home buyers in this market was also unchanged at 35.3% (35.2% in Q3), but continued to trend above the survey average (31.5%). Overall, first timers were most active in NSW (39.5%) and VIC (38.3%) and least active in WA (25.7%) and SA (27.0%).
The report suggests that, if rate hikes come forward, it is likely that property prices could turn in the second half of 2022. That would mean a flatter outcome in 2022 and a possible fall in 2023.
“Overall, we see dwelling prices rising around 3% in 2022 before a decline of around 10% in 2023. We see this as a relatively orderly decline, and it is important to remember this correction comes after a very sharp run up in prices over the last year”, the report notes.
More broadly, however, the NAB team expects the economy to continue seeing healthy outcomes. With above-trend growth this year, unemployment is likely to drift lower, boosting wage growth and driving more sustainable inflation.
This would see the Reserve Bank begin normalising rates from November 2022 with a steady series of hikes to come through 2023 and 2024, the report concludes.