The Australian housing market has started 2020 on a firm footing, with NAB’s Residential Property Index climbing to its highest level in nearly 6 years.
According to the NAB Residential Property Survey published on 31 January, the Index rose a further 16 points to +34 – after moving into positive territory in the third quarter of 2019, for the first time since mid-2018.
“Stronger sentiment was supported by rebounding dwelling values in the last three months of the year, and was positive in all states for the first time since early-2018,” the report says.
Sentiment was highest in VIC, but improved most in NSW. Confidence also lifted further in other parts of the nation, particularly in WA suggesting the local market could be emerging from its downturn.
The survey expectation is for price growth to accelerate in all states in 2020- 2021. Property professionals surveyed also see price growth overtaking rents for the first time in two years, suggesting yields will compress in the future.
With mortgage rates falling and the new First Home Buyers Loan Deposit Scheme taking effect from January 2020, FHBs dominated sales in new housing markets and increased their market share in established markets.
“Tight credit remains the biggest constraint on new housing development, and access to credit the biggest impediment for buyers of existing property, but property professionals indicated their impact on the market was less severe in the final quarter of 2019,” the report says.
“NAB’s view is that while prices rebounded more strongly than expected in the second half of 2019, dwelling price growth will slow in an underlying sense in 2020 and 2021 in Sydney and Melbourne. Outcomes for the other capitals are likely to be more mixed, driven by state specific factors.
“Low interest rates are expected to continue to provide support, as is the low level of unemployment and still healthy population growth. However, affordability constraints will arise as prices reach their previous peak.”