March quarter shows housing sentiment steady: NAB

In its residential property index, the National Australia Bank’s (NAB) outlook remains “broadly unchanged” predicting an overall rise of around 2.5 per cent this year, before a moderate fall of around 10 per cent in 2023.

As Australia's international COVID restrictions eased from 18 April, NAB said the growth in foreign buyers in the first quarter is "a development to watch".

The NAB survey revealed a resurgence of foreign buyers ticked up to a near two-year high of 7.9 per cent nationally and accounted for an above-average and four-year high of one in 10 sales in NSW. 

The report also said the housing market had turned slightly quicker in Sydney and Melbourne than previously expected, with dwelling price forecasts at 0.4 per cent and 0.2 per cent, respectively this year, before plunging more than 11 per cent next year.

But dwelling price forecasts have outperformed in the smaller capitals with Brisbane up 7 per cent, Adelaide’s predicted price growth at 6.2 per cent, Hobart at 5.2 per cent, and Perth lagged at 1.5 per cent, in 2022.

The bank predicted growth will slow in Brisbane and Adelaide, before turning negative at the back end of 2022, alongside falls across the capitals.

This is in line with NAB’s predictions the Reserve Bank of Australia will begin to steadily increase rates from June this year, taking the cash rate to 1 per cent by the end of the year and 1.75 per cent by end-2023.

NAB said this was an “orderly correction” in house prices with the economy and labour market continuing to “perform strongly” and wage growth strengthening.

Despite mounting concerns over the cash rate increase for some borrowers, NAB said household balance sheets remain in good shape and the savings rate is still elevated, which suggested households will be able to adapt to higher interest rates.

NAB executive, Ben Nicholls said many customers had taken the opportunity to get ahead on their repayments during the pandemic.

“On average, NAB customers are four years ahead on their repayments,” Mr Nicholls said.

“It is pleasing to see first home buyers continue to be the most active participants in the new housing market.

“At NAB, we have supported over 12,000 Australians to buy their first home via the First Home Guarantee and Family Home Guarantee schemes over the past two years.”

Though first home buyers remain the most active participants in new housing markets, the survey indicated their share of total sales dipped to a 2.5-year low at 40.5 per cent in the March quarter 2022.

Rents are however expected to grow well above average survey levels and outpace price growth in all states, which has helped fuel the housing market sentiment.

According to NAB’s Residential Property Index, a marker for housing sentiment, the March quarter remained steady at 58 pts, compared to 59 pts in the previous quarter, well above the average at 17 pts.

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