Rental markets are set for solid growth into the next year, a new report shows.
NAB’s Quarterly Australian Residential Property Survey Q3 2022 has revealed that while general sentiment fell, solid growth in rental markets continued to provide support over the period.
Overall, the NAB Residential Property Index fell to +9 pts in the third quarter (from +29 pts in Q2), and drifted below the survey average (+17) for the first time in two years.
Sentiment fell in all states except Western Australia (+58 pts), but remained highest in the Northern Territory (75 pts). It turned negative in the ACT (-75 pts) and Tasmania (-25), with NSW (-5 pts) and Victoria (-2 pts) negative for the first time since the second quarter 2020.
Sentiment also dipped sharply in South Australia and Queensland, although both states reported a positive outcome (+40 and +10, respectively).
The average survey forecast for national house prices in Q3 was now predicted to be down 2.6% in 12 months’ time, and 1.4% in two years’ time.
The outlook for rents lifted in the third quarter 2022, and they are now expected to grow by a solid 3.5% in the next year and 3.8% in two years’ time nationally. With rents growing faster than house prices, gross yields should improve, with rents out-stripping prices in all states.
With supply chain issues, high raw material prices and labour shortages persisting, construction costs are still seen as the main constraint on new housing development nationwide.
Property professionals believe the three most important considerations for home buyers when deciding to buy a property are the amount they are prepared to borrow to buy (82%), good local amenities (60%) and the size of the house (57%).
New research also finds the rising cost of renovations is having a ‘quite significant’ influence encouraging people to buy fully renovated properties (7.5 pts out of 10), with the extent the use of digital tools has become more important in selling properties also ‘quite significant’ (7.1 pts out of 10).
NAB’s outlook for property prices is broadly unchanged, with dwelling prices expected to decline by around 20% across the capital cities from the peak in mid-2022. The declines are expected to be broad-based, but led by areas where affordability constraints are most binding. To date, Sydney and Melbourne have led the declines, but prices in other capital cities now appear to have also peaked – and the decline in Brisbane has accelerated.
More broadly, the report concludes, the economy and labour market continue to show resilience but are expected to soften under the impact of higher rates and elevated inflation on household budgets.
