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NAB report is nation’s worst at forecasting prices

Perhaps the worst property forecast report published each year is the NAB Residential Property Survey.

NAB publishes its survey results every February, presenting forecasts for what it says property prices will do in the year ahead.

The latest report, published in the past week, has attracted massive media coverage across Australia, particularly because the report is forecasting a 9-10% decline in property prices next year.

In our day-to-day research at Hotspotting, we’ve seen all the articles written about this report.

And I have to say it’s a damning indictment on the standard of journalists in Australia. Every one of the dozens of journalists who wrote an article on this NAB report simply presented the information in the NAB press release.

Some just published the press release, pretty much word for word.

Not one journalist asked any questions, or sought alternative viewpoints. And, in particular, no one checked on previous editions of the NAB price forecast report to confirm whether or not the NAB economists have a good track record in predicting property prices.

If they’d done that, they would have realised that this NAB report is one of the worst in Australia at predicting real estate events.

In February 2020, it forecast that Australian capital city prices would rise 2.0% in 2020 – with Sydney to rise 2.7%, Brisbane 3.6%, Perth 1.9% and Hobart 6.1%.

But when we saw the onset of Covid soon after that, NAB changed its forecast to rapidly falling prices in the capital cities, with forecast decline of 15% or 20%.

The actual outcome for 2020, according to CoreLogic data, was a rise of 4% in Sydney, a 7.7% rise in Hobart, a 6% rise in Adelaide, a 5% rise in Brisbane, an 8.5% rise in Canberra and an 12% rise in Darwin.

In other words, there were solid increases in major markets right across Australia, contrary to the NAB forecasts of a collapse in property prices.

So a year ago, in February 2021, the NAB report forecast that Australian capital city prices would rise 7.9% overall – with Sydney to rise 7.3%, Melbourne 5.5%, Brisbane 6.3%, Adelaide 7.4%, Perth 7.0% and Hobart 7.4%.

The actual outcome, according to CoreLogic data, was a 24.5% rise in capital city house prices, treble the level predicted by NAB. Sydney was forecast to rise just 7.3% but actually delivered 29.6%, while Brisbane’s 30.4% rise was five times the rate predicted by NAB.

How could economists employed by one of Australia’s Big 4 banks get it so utterly wrong?

So now NAB has published its latest survey with forecasts that capital city property prices will rise just 2.7% in 2022. It will be proven spectacularly wrong yet again.

Its forecasts include 4.2% for Brisbane and 3.5% for Adelaide. The CoreLogic data published on 1 February indicates that, at current growth rates, the Brisbane and Adelaide markets will have grown by more than that by the end of February.

The NAB 2022 forecasts suggests that both Sydney and Melbourne prices will grow by less than 2%.

Even more startling are the NAB forecasts for 2023. It suggests capital city prices will fall 9.3%, led by falls of 11.4% in Sydney and Melbourne. Not 11.3% or 11.5%, mind you, but exactly 11.4% in both cities.

And then we see the reasoning for his outcome. Quite simply, according to the boffins at the NAB, interest rates will rise and therefore property prices will fall.

It’s that simple, apparently.

It’s like getting market analysis from the primary school student.

There’s no precedent in Australian real estate history for an interest rate rise to cause prices to fall.

The NAB economists will be proven wrong, yet again.

But let’s remember the definitive definition of an economist:-

Someone who can tell you tomorrow, why what they predicted yesterday, didn’t come true today.

Why do we ever listen to these people, who get it wrong on real estate every single time.


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