The NAB Residential Property Index Q4 2017 released recently reveals a clear shift in momentum from eastern states such as NSW and Victoria towards the rest of the country.
Trends have been mixed in recent quarters but the latest slump in key eastern states, which saw NSW fall by 20 points and Victoria by 19 points has brought the focus back to the South Australian, Northern Territory and Western Australian property markets.
While confidence waned in NSW and Victoria, the South Australian and Northern Territory property markets gained by 53 points. Western Australia rose by a point and Queensland lost just two points.
The slowdown in dwelling prices impacted NSW significantly with sentiment falling to its lowest level in two years. Following years of strong growth, a 2.4 percent drop in house prices is predicted this year for the state.
Unit prices in Sydney and Brisbane are expected to fall in 2018 and 2019 while Melbourne is predicted to see a 1.8 percent drop in 2019. NAB chief economist Alan Oster expects to see a fall in Sydney prices for the first time since 2011.
In terms of rental income, the growth has been revised down to 1 percent from 1.5 percent for NSW; Victoria is expected to see the highest rental returns in the country but the growth at 2.1 percent is down from the previously expected 2.8 percent.
The December quarter saw the share of first home buyers in new and established housing markets reach new survey highs, accounting for almost 2 in 5 sales in new housing markets and around 1 in 3 in established markets.
The share of foreign buyers in Australia’s housing markets in Q4 dropped to a six-year low of 8.4 percent in new property markets and a 5-year low of 5.5 percent in the established housing market.
According to NAB’s forecast, housing prices are expected to increase by only 0.7 percent in 2018 (previously 3.4 percent), with growth remaining subdued at 0.8 percent in 2019.
Underperformance in the apartment market will add to the stock – unit prices are forecast to fall 0.9% in 2018 (previously +0.5 percent), and decline another 1.8 percent in 2019.
About 300 property professionals participated in the NAB Quarterly Australian Residential Property Survey Q4 2017.