The NAB Residential Property Survey Report for Q4 2015
Every three months, the National Australia Bank (NAB) releases an update on residential property in Australia. They base their findings on a survey of approximately 300 respondents consisting of real estate agents, property managers, developers, asset and fund managers, valuers and property owners. They released their most recent report last week, which you can download here. It contains their latest statistics on the Australian residential property market.
For a glimpse back over the past year, you can read my commentary on NAB’s previous reports here:
If you’ve kept your finger on the pulse of the market, then not much in the NAB residential property survey report will surprise you. We all know investors are finding it tougher to get loans and auction clearance rates have taken a dive. As a result, Sydney property values moved backwards last quarter, and Melbourne’s growth has slowed considerably.
However, the NAB does have a few insights that investors should find helpful to know. Here’s my top three:
1. Banks seem a little more bearish than they were three months ago.
In October’s report, the NAB’s forecast for average national house price growth for 2016 was 2.3 percent. In light of credit restrictions on investors, declining affordability and an oversupply of homes, they’ve revised their forecast down to one percent.
For the first time, the NAB has included a separate forecast in their report for unit prices, since a large percentage of the new supply will be large apartment blocks. The NAB expects unit prices nationwide to fall by 1.2 percent over 2016. The wild card is what to expect from foreign investors, who make up a large percentage of apartment demand.
Looking at the nationwide new property market, overseas demand trended down by 1.3 percent from the previous quarter. Here are the state-specific results:
- Victoria – 16.4 percent, down sharply from 25.2 percent
- New South Wales – 11.7 percent, down from 13.6 percent
- Western Australia – 5.8 percent, down from 8.3 percent
- Queensland – 20.9 percent, up from 17.7 percent
Queensland is the state that the NAB seems to be the most optimistic about. Brisbane is tipped to see a price-growth of three percent, although Melbourne may not be far off at two percent. Adelaide and Sydney, on the other hand, are expected to remain flat, while Perth is projected to decline another three percent.
2. There’s plenty of residential stock in the pipeline.
Photo by Adam.J.W.C. / CC BY-SA
One of the primary reasons for the NAB’s less enthusiastic view is the oversupply of new homes. New residential construction is expected to more than offset the new demand, especially in the apartment market.
First home buyers and current owner occupiers made up a higher percentage of demand for new dwellings in the fourth quarter, as demand from local investors slowed considerably. In the national market, investor demand declined to 22.5 percent, down from 26.3 percent. If this trend continues and more investors leave the new housing market, the backlog of available homes could grow.
3. A sharp correction is possible, though not likely.
Even though the property market is clearly slowing down from last year’s pace, the NAB remains confident that a severe downturn in the market remains only a remote possibility. While they see the risk as greater than it was six months ago, they would only anticipate a sharp correction to result from an overseas economic shock of some sort.
The two most likely culprits would most likely be the deterioration of the local labour market and/or the wave of Chinese selling. If Aussies start losing jobs, or if foreign investors need to liquidate capital to meet margin calls overseas, watch out.
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