NAB has adjusted its house price growth forecasts for this year after sharp price rises and an uptick in investor credit.
The NAB Quarterly Australian Property Survey Q3 2016, released last week, showed an overall improvement in housing market sentiment, supported by renewed momentum in house prices.
NAB Group Economics revised its national house price forecasts for 2016 upwards to 7.9 per cent and its unit price forecasts to 5.2 per cent for 2016 (from 5.1 per cent).
“We have revised our price forecasts upwards in response to a sharp rise in the six-month annualised growth in dwelling prices, particularly in Sydney and Melbourne,” NAB group chief economist Alan Oster said.
“The RBA’s recent interest rate cuts have been a major source of support, while investor credit has also picked up again. On the supply side, there also appears to be a number of factors at play with auction and sales volumes down compared to a year ago,” Mr Oster said.
“As we have said for some time, there is considerable uncertainty over the outlook for dwelling prices. We are expecting a more subdued environment from late 2017 as supply conditions become less favourable.”
However, Mr Oster said the NAB continues to hold the view that residential property prices are unlikely to experience a severe price correction without a trigger that leaves unemployment or interest rates sharply higher.
While NAB’s index showed improved sentiment over the third quarter, this varied significantly by state.
Sentiment was highest in New South Wales and Victoria (by some margin), and negative in Western Australia and South Australia/the Northern Territory.
“Overall confidence in the market going forward has however wavered, with lower outcomes in Queensland, SA/NT and WA offsetting small gains in NSW and Victoria,” Mr Oster said.
“On average, property experts have revised up their expectations for house prices in the next one to two years in Victoria, NSW and SA/NT, cut them back in Queensland and still see prices falling in WA.”
The index noted that foreign buyers were seen as having played a lesser role in local markets in Q3, accounting for an estimated 10.2 per cent of all new and 6.4 per cent of all established property sales, the lowest reported levels since mid/late 2012.