Sentiment Boost Reverses Expectations of Further Declines: NAB
As subdued economic growth, access to credit and dwindling building approvals continue to create headwinds, a surge in housing market sentiment has engendered a rosier outlook.
Recent figures from NAB’s residential property survey show an uptick in sentiment among property professionals, reversing expectations for further declines reported in the first quarter survey.
The quarterly index — based on the expectations of property professionals for capital growth and rents — has reached a 12 month high after recovering from a survey low of -20 in the final quarter of 2018.
Despite remaining in negative figures, the index rose 7 points to -8, with sentiment improving in all states other than South Australia and the Northern Territory.
It’s the latest indication of a boost in confidence for a recovering market, with NAB revising its house view from a 20 per cent peak-to-trough forecast, to a “broadly flat” outcome over the next 18 months.
Related: Australia’s Residential Market ‘Approaching Bottom’: BIS
NAB residential property index
| Q1 '19 | Q2 '19 | 1 year | 2 years | |
|---|---|---|---|---|
| Victoria | -21 | -8 | 25 | 45 |
| NSW | -36 | -27 | 5 | 29 |
| Queensland | -9 | 8 | 42 | 56 |
| WA | -8 | -3 | 48 | 61 |
| SA/NT | 32 | -18 | 18 | 25 |
| Australia | -15 | -8 | 27 | 45 |
Sentiment improved in all states in Q2 (bar SA/NT) but remained negative in most states. Queensland was the exception, with the state index up 17 points to +8.
NAB chief economist Alan Oster said longer-term prospects are even more optimistic, particularly in NSW and Victoria.
“Property professionals expect growth in rents to outpace prices, pointing to a further improvement in rental yields,” Oster said.
“Interestingly, the trend decline in foreign buyers of new property reversed, with their market share rising to 7.1 per cent in the second quarter, led by a sharp jump in Victoria [of] 12.1 per cent.”
Oster warned that while prices have stabilised and auction clearance rates have strengthened, building approvals have experienced a sharp decline.
“Construction is expected to ease further, with [declining] approvals and the national accounts measure of dwelling investment declining by 5 per cent over the past 6 months.
“While the pipeline of work remains elevated, the current level of work done remains high — suggesting that with the current level of capacity in construction, the pipeline should fall relatively quickly.
Oster added that strong population growth should continue to support prices this year.
