Salamanca Realty

NAB Residential Property Survey - September Report

NAB Residential Property Survey - September Report

Key highlights:

National housing market sentiment fell to below survey average levels in Q3 2022 as the downturn in the national housing market gathered speed and spread wider. Solid growth in rental markets however continued to provide some support.
NAB continues to see an ongoing adjustment in the property market as interest rates rise - and still expect to see a peak to trough fall of around 20% in property prices.

National housing market sentiment fell for the second straight quarter in Q3 as the downturn in the national housing market gathered speed and spread wider. Overall, the NAB Residential Property Index fell to +9 pts (+29 pts in Q2), and drifted below the survey average (+17) for the first time in 2 years. The index is now being mainly supported by a strong home rental market.

Sentiment fell in all states in Q3, except WA (+58 pts), but remained highest in the NT (+75 pts). It fell most and turned negative in the ACT (-75 pts) and TAS (-25), with NSW (-5 pts) and VIC (-2 pts) negative for the first time since Q2 20. Sentiment also dipped sharply in SA (+40) and QLD (+10), but both states were (along with WA) the only areas to report a positive outcome.

Short-term confidence levels sagged further in Q3, with the 12 month measure now at a 2-year low +10 pts. The 2-year measure however ticked up slightly to +25 pts, but is still well below average (+45 pts). WA (+60 pts) is the most confident state in the short-term - and the only state to report an uplift in confidence.

The average survey forecast for national house prices in Q3 was cut to -2.6% in 12 months’ time (previously -1.2%), and -1.4% in 2 years’ time (previously -1.3%). Expectations for the next 12 months were pared back in all states except WA - now forecast at 2.2% (1.4% in Q2). Property professionals have prices falling in VIC (-4.5%), the ACT (-4.0%) and NSW (-3.7%).
The outlook for rents lifted in Q3, and they are now expected to grow by a solid 3.5% in the next 12 months and 3.8% in 2 years’ time nationally. With rents growing faster than house prices, gross yields should improve, with rents out-stripping prices in all states.

With supply chain issues, high raw material prices and labour shortages persisting, construction costs are still seen as the main constraint on new housing development nationwide. Rising interest rates have also overtaken tight credit as the next biggest constraint. With the upswing in rates continuing, property professionals again highlighted rising interest rates as the biggest (and a growing) constraint for buyers of existing property.

Property professionals believe the 3 most important considerations for home buyers when deciding to buy a property are the amount they are prepared to borrow to buy (82%), good local amenities (60%) and the size of the house (57%). New research also finds the rising cost of renovations is having a “quite significant” influence encouraging people to buy fully renovated properties (7.5 pts out of 10), with the extent the use of digital tools has become more important in selling properties also “quite significant” (7.1 pts out of 10).