Home buying sentiment slides: NAB

A new survey from NAB has shown a dip in home buying sentiment, with the number of consumers who thought now was a good time to buy a home fell by a quarter, to 29 per cent of Australians in the June quarter.

The proportion had declined from the first quarter of the year, when 40 per cent of consumers said now was the time to buy – continuing a downward trend from 45 per cent in the last quarter of 2020, and 44 per cent in Q3 2020.

A quarter of consumers said now is a good time to buy an investment property, compared with 31 per cent in the March quarter, 34 per cent in the three months to December and 31 per cent in Q3 2020.

Meanwhile, the number of consumers who said they intend to buy a home in the next 12 months slipped by 2 per cent from the quarter before, to 13 per cent in Q2.

However, the variation was in line with the two last quarters of 2020, when 15 per cent of people signalled home buying intentions in the September quarter and 13 per cent agreed in December.

Intentions to buy investment properties remained unchanged at 9 per cent – slightly up on Q3 and Q4 2020, when it was 8 per cent.

Similarly, CBA data recently revealed home buying intentions were down in July, compared with a year prior – but sentiment was still higher than in July 2019.

Looking across states, Western Australia and South Australia residents were the most optimistic about buying a home now, with 36 per cent and 35 per cent agreeing, respectively.

South Australians were also most likely to be confident about buying investment property, with 28 per cent saying now is the time.

Home buying intentions for the year ahead were highest in NSW (15 per cent), just ahead of WA (14 per cent), the ACT (14 per cent) and Victoria (13 per cent).

Queensland and South Australia were close behind with 11 per cent for both, while Tasmania had 01 per cent of people agreeing.

Buying intentions seemed to drop most dramatically across Victoria (where it was once 20 per cent in Q3 2020) and in the ACT (when it had seen 22 per cent in the March quarter).

Intentions for buying investment property in the 12 months ahead were strongest in the ACT (13 per cent) – compared with 11 per cent in NSW, 10 per cent in Victoria, 8 per cent in Tasmania and 7 per cent in Western Australia.

Queensland had the lowest intentions for buying investment property, at 4 per cent.

Places where it’s cheaper to buy than rent

NAB also released a list of suburbs where it is cheaper to service a mortgage than pay rent, assuming an 80 per cent loan-to-value ratio home loan, with an interest rate of 2.69 per cent over a 30-year term.

In Sydney and Melbourne, the bank reported it is necessary to move further out from the CBD or to relocate to regional areas, to avoid the recent price hike.

In contrast, all other capital cities had areas where it possible to buy at a lower price than renting, particularly in Perth, Adelaide and Brisbane.

Adelaide

• More affordable house areas were located in the outer north of the city, such as Elizabeth and Salisbury
• Optimal unit markets were found in the Adelaide CBD and Glenelg, as well as Mawson Lakes

Brisbane

• Housing markets where it’s cheaper to buy rather than rent were mainly in the outer suburbs, particularly north and west of Greater Brisbane. Areas included Logan, Bald Hills, Redbank Plains, Redcliffe and Caboolture.
• In contrast, unit markets providing opportunities for cheaper buying rather than renting were found within a three-kilometre radius of Brisbane CBD, with areas such as Brisbane City, Fortitude Valley, Spring Hill and South Brisbane. Outer unit markets providing opportunities could be found on the north side, including in Chermside.

Canberra

• There are 40 suburbs within the ACT that provide cheaper sales over rent for houses, despite a rapid pace of growth over the last year. Markets included Kambah, Ngunnawal and Bonner.
• Meanwhile unit markets included Braddon, Belconnen, Franklin and Kingston.

Darwin

• House markets: Zuccoli, Gunn, Durack and Leanyer
• Unit markets: Darwin City, Stuart Park and Larrakeyah

Hobart

• House markets: Glenorchy, Sorell, Howrah, Moonah and Kingston
• However, only one unit market was found to provide cheaper mortgage repayment than rent: Glenorchy

Melbourne

• Suburbs which comprise higher volumes of units provide opportunities, with inner city unit markets including Carlton, Melbourne CBD, Southbank, Docklands and Abbotsford, as well as suburbs such as Bundoora.
• Housing markets: Melton and Melton South, located on the outskirts of Greater Melbourne

Perth

• House markets: Armadale, Greenfields, Port Kennedy, Clarkson and Baldivas
• Unit markets: Perth CBD, East Perth, South Perth, Rivervale, Maylands and Fremantle

Sydney

• Areas predominantly in the outer-west and north-western suburbs provided opportunities, with higher volumes of units. Unit markets included Campbelltown, Liverpool, Blacktown and Penrith, as well as Bankstown.

Meanwhile, areas outside of the major cities where it is cheaper to service a mortgage rather than paying rent included:

NSW: Broken Hill, Orange, Dubbo, Goulburn, Armidale, Port Macquarie, Bathurst, Coffs Harbour, Grafton and Tweed Heads

Victoria: Benalla, Warrnambool, Portland, Sale, Horsham, Shepparton, Echuca, Bairnsdale, Wangaratta, Yarrawonga

Queensland: various suburbs across the Gold and Sunshine Coasts, as well as Toowoomba, Cairns, Bundaberg, Mackay and Roma

Western Australia: Port Hedland, Newman, Broome and South Hedland

South Australia: Naracoorte, Port Augusta, Mount Gambier, Murray Bridge, Port Lincoln and Victor Harbour

Tasmania: Queenstown, Ulverstone, Launceston, Devonport and Wynyard

Andy Kerr, NAB executive for home ownership commented that first home buyers have benefitted the most from mortgage repayments being cheaper than rent across outer-metro suburbs, inner-city apartments and regional areas.

“Record-low interest rates and first home buyer incentives like the First Home Loan Deposit Scheme have driven strong demand,” Mr Kerr said.

“We have seen through the pandemic, particularly with first home buyers, that flexible and hybrid working is providing more options that they have historically had.”

NAB had also revised its forecast for house prices in July 2021, based on the faster than expected growth in prices over recent months.

The big four bank predicted a slowing in the monthly pace of growth, with dwelling prices expected to lift by around 18.5 per cent in 2021 and 3.6 per cent in 2022. The bank’s projection is higher than a recent estimate from Fitch, which calculated a 14-16 per cent rise in 2021.

Since September last year, capital city house prices had risen by 14 per cent, leaving them 12 per cent higher than their pre-pandemic level (in February 2020). CoreLogic data showed property prices grew by 13.5 per cent in the 2021 financial year.

[Related: NSW removes lockdown exemption for investors]