Housing market sentiment has lifted to a new high as house prices and rents continue to grow across the country, according to a new report released this week by NAB Group Economics.
Price growth is likely to slow over the next 1-2 years, however, while rents will remain stable.
NAB Quarterly Australian Residential Property Survey Q2 2021 has revealed that dwelling prices are now expected to grow around 19% in 2021, and a further 4% in 2022. Low rates and strong income support have seen strong price growth in 2021, but this impact will begin to fade, the report suggests.
Continued strong growth in house prices across the country and further gains in rents lifted the NAB Residential Property Index to a survey high +71 pts in Q2, with above-average outcomes reported in all markets.
With housing affordability starting to kick in, particularly on first home buyers, other NAB research shows that government incentives have been only ‘moderately’ significant in helping FHBs to get into the market earlier. This has been most notable in Victoria and New South Wales, where rapidly rising house prices have had a bigger (negative) impact.
Interestingly, the survey found that first home buyers are more willing to build or buy newly-build homes now compared to two years ago, especially in the Northern Territory and in Tasmania, though less so in NSW and Victoria.
The NAB economists said that faster-than-expected outcomes in recent months have meant a higher starting base, and while they expect a slowing in the monthly pace of growth from here, they still see solid growth over the next six months.
“The upgrade to our forecast is relatively uniform across capital cities. The better-than-expected recovery in the economy and labour market alongside very low interest rates has supported the strong rebound in the property market”, the report authors wrote.
“Affordability constraints will likely begin to bind over the year and see a slowing in price growth as the impact of lower rates fades.’
The NAB Residential Property Survey (Q2 2021) is available for download from the business.nab website.