Housing market slumps

Sentiment sours as downturn ramps up

SENTIMENT in the housing market is continuing to fall as the downturn gathers speed, a new National Australia Bank survey has found.

The bank said it continued to see an adjustment in the property market as interest rates rise; it is among the forecasters expecting a peak-totrough fall of about 20 per cent in property prices.

“The housing market has been adjusting to a higher level of interest rates and will continue to do so in the near-term as the RBA lifts rates further and the impact of the previous rate hikes continues to flow through,” NAB Group chief economist Alan Oster said.

“Our outlook for property prices is broadly unchanged, with dwelling prices expected to decline by around 20 per cent across the capital cities from the peak in mid-2022.”

The bank said declines were expected to be broadbased but led by areas where affordability constraints are most binding.

“To date, Sydney and Melbourne have led the declines, but prices in other capital cities now appear to have also peaked – and the decline in Brisbane has accelerated,” Mr Oster said.

The NAB Residential Property Index, which surveyed property professionals, showed their sentiment on housing fell for the second straight quarter.

It fell to +9 points from +29 points in the second quarter, and drifted below the survey average (+17) for the first time in two years.

The index is now being mainly supported by a strong home rental market.

Sentiment fell in all states in the last quarter, except Western Australia (+58 points), but remained highest in the NT (+75 points). It fell most and turned negative in the ACT (-75 points) and Tasmania (-25), with NSW (-5 points) and Victoria (-2 points) negative for the first time since the second quarter of 2020. Sentiment also dipped sharply in SA (+40) and Queensland (+10), but both states were (along with WA) the only areas to report a positive outcome.

The average survey forecast for national house prices in the last quarter was cut to -2.6 per cent in 12 months’ time (from the previous level of -1.2 per cent), and -1.4 per cent in two years’ time, from a previous -1.3 per cent.

Expectations for the next 12 months were pared back in all states except WA – now forecast at 2.2 per cent (1.4 per cent in the second quarter). Property professionals have prices falling in Victoria (-4.5 per cent), the ACT (-4 per cent) and NSW (-3.7 per cent).

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.

With the upswing in rates continuing, property professionals again highlighted rising rates as a growing constraint for buyers of existing property.