Expectations for house price growth improved marginally in the final quarter of 2012 but remain very modest, with just 2.1% growth tipped for the next two years, according NAB’s December 2012 quarterly residential property index survey.
This compares with September quarter expectations of a 1.7% gain in house prices over the next two years.
The expectations are based on the sentiments of around 270 property markets participants, predominantly estate agents (39% of respondents), property owners and investors (20%) and developers (17%).
They indicate that despite rate cuts and improving housing affordability, there is still much caution among those directly involved in the property market about medium-term prospects, though they have brightened.
The survey found that concerns over housing affordability are falling slowly as interest rates fall but are still “significant”.
In addition, property professionals remain concerned about the domestic economy and a weakening labour market, with “employment security entrenched as the biggest impediment to purchasing existing property in all states”.
“Access to credit also seen as a ‘significant’ impediment to purchasing existing property,” NAB says of the survey results.
Property professionals expect “good” capital growth prospects in the sub-$500,000 market next year, but the outlook for premium stock is still “poor”.
The strongest outlook is for the mining-states of Western Australia and Queensland, where house prices are expected to increase by 3.6% and 2.2% respectively over the next two years, driven by strong state economic growth, migration and rental growth.
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Perth will be the strongest performing capital city market with capital growth forecast to run at around 3.5% through the year to end-2013 and 5% in the year through to end-2014, “underpinned by improved affordability, population growth and above average state economic growth”.
Brisbane house prices are forecast to increase by 1.7% over 2013 and then by 3.5% over 2014.
Stronger price growth is also tipped for NSW (1.8% over the next two years compared with 1.5% in the previous quarter), with Sydney set to outperform with growth of 2.1% in 2013 and 3.7% in 2014.
Expectations also improved in Victoria, where property professionals now expecting house prices to grow by 1.9% in the next two years, having previously forecast 0.9% growth.
Melbourne house prices are expected to continue to tread water over 2013 – rising just 0.4% – but are expected to pick up slightly in 2014, rising by 2%.
Expectations for house price growth over the next two years for the combined South Australia/Northern Territory market were scaled back to 1.5%, from 2.4% previously.
Melbourne along with Adelaide (growth of 0.1% in 2013 and 2% in 2014) are forecast to be the worst-performing markets for house price growth in 2013 and “will continue to lag the capital city average with state economic conditions and employment prospects in both these states also expected to remain tougher”.
The overall index rose 4 points in the final quarter to sit at 8 points attributed to the rate of decline in national house prices slowing and rents growing.