NAB Group Economics has lifted its national house price forecasts for 2017 to 3.4 per cent (previously 0.4 per cent).
Unit price forecasts were also revised up, to 0.8 per cent for 2017. Previously, NAB had tipped unit prices to fall by 1.6 per cent.
“Solid market sentiment in the NAB survey and a surprisingly strong price response to lower interest rates in 2016 has prompted us to revise up our 2017 forecasts, given NAB’s expectation for more rate cuts this year,” NAB group chief economist Alan Oster.
“However, we still expect the housing market to cool noticeably in 2017, especially for apartments.
“There is still considerable uncertainty over the outlook for dwelling prices. In addition to supply concerns, affordability is still a major issue in the best performing markets, while credit conditions have tightened somewhat, especially for foreign buyers and investors.
“Considering all of these factors, conditions are expected to soften going forward, contributing to more moderate price growth in the major property markets this year.”
However, Mr Oster said that NAB continues to hold the view that residential property prices are unlikely to experience a severe ‘correction’ without a trigger from a shock that leaves unemployment and/or interest rates sharply higher.
Foreign buyers back in the market
The latest NAB Residential Property Survey found that foreign buyers have increased their share of both new and established housing markets for the first time since late 2015.
According to the report, in the fourth quarter of 2016 (Q4), foreign buyers accounted for 10.9 per cent of all new property purchases (10.2 per cent in Q3) - the highest level since the first quarter of 2016. In established housing markets, their share rose to 7.6 per cent (6.4 per cent in Q3) - the highest level since Q4 2015.
In new property markets, foreign buyers were noticeably more prevalent in Victoria, where their market share of sales rose to 19.3 per cent (15.0 per cent in Q3).
“In WA, their market share grew to 9.3 per cent (6.6 per cent in Q4). Interestingly, the share of foreign buyers in WA has been climbing steadily since Q2 2016, suggesting foreign buyers may be seeing greater value as local prices fall,” the report noted.
“Foreign buyer levels were, however, broadly unchanged in NSW at 8.1 per cent (8.0 per cent in Q3) and fell in Queensland to 9.2 per cent (10.5 per cent in Q3) – its lowest level since mid-2014.”
In established housing markets, the NAB survey found that the share of foreign buyers increased to 10.8 per cent in Victoria (8.5 per cent in Q3) - its highest level in over a year - and 8.4 per cent in NSW (7.2 per cent in Q3).
“Foreign buyers were also a little more active in WA (5.4 per cent v 5.2 per cent in Q3), but were less prominent in Queensland, where their market share fell to just 5.0 per cent (5.7 per cent in Q3) - the lowest since mid-2012,” according to the report.
[Related: Warning over off-the-plan deposits]