- Solid house price growth; rental markets relatively soft
- Sentiment lifted although Victoria is behind
- Interest rates forecast to remain low for several years
NAB’s Quarterly Australian Residential Property Survey Q4 2020 has revealed that despite economic challenges, the NAB Residential Property Index ended 2020 at a survey high.
Sentiment has hit a record high of +45 points, remarkable considering the survey hit a low of -33 points only in Q2 of 2020.
This large increase in sentiment is due to a variety of factors such as solid house price growth throughout most of the nation and strong first home buyer activity. All states saw sentiment increase except for Victoria – in part, due to the aftermath of their lockdown.
Overall, the housing market outperformed initial expectations despite a weaker labour market and slower population growth – predominantly due to less migration.
NAB has increased its forecasts for dwelling price growth to eight per cent in 2021 and six per cent in 2022. Notably, the bank expects the growth in smaller capitals to outpace Melbourne And Sydney due to slower population growth which is likely to influence the apartment market.
There is also an expectation of house price growth overall to be at around 10 per cent – slightly higher than units.
“There are a lot of suburbs where it is cheaper to get a mortgage then to rent,” said Alan Oster, NAB’s Chief Economist.
“Owner-occupied is growing by 0.5 per cent a month which is pretty strong, investors are doing nothing….the debt levels out there across the community are not as high as what you might think given what everyone is seeing in terms of house prices.”
Mr Olster remains bullish about the residential property market and acknowledges a diverse string of factors that will influence prices.
The potential return to normal levels of migration, if a vaccination rollout is successful, could further increase prices – especially considering that historically population growth is a major factor in house prices.
Mr Olster ultimately does believe however the cash rate – which the RBA has committed to not increasing until 202# – will encourage demand for the foreseeable future.
“The fact they (interest rates) are going be low for a long time – three to three-and-a-half years, that says to people ‘As long as I have got my job, hopefully things will get better as we go forward…now it is not a bad time (to buy a house).”