Thursday, April 21, 2011

NAB Quarterly Australian Residential Property Survey - March 2011

House price expectations were revised up slightly in the March quarter survey, but gains are expected to remain modest. Nationwide prices are tipped to increase by just 0.6% over the next year led by WA (1.1%), NSW/ACT (0.9%). Victoria & Tasmania (0.5%) and Queensland (0.1%). House prices in SA/NT are tipped to fall by 0.1%. Looking further ahead, house prices are expected to rise by 2.6% over the next two years. WA is still the best performing state (3.8%) and Victoria & Tasmania the worst (1.6%).

The outlook for rents has also improved. Nationwide rents are forecast to rise 3.5% in the next year and 5.2% by March 2013. The biggest gains in this period are forecast for WA and NSW/ACT. Rental expectations are weakest for SA/NT and Queensland.

Stronger price and rental expectations have boosted NAB’s Residential Property Index. The Index is now expected to rise to 45 points over the next year (27 points in December). Improvements are forecast in all states, led by WA and Victoria & Tasmania. Queensland is expected to remain the weakest state, but conditions are expected to be much better than in our previous survey. The Index is expected to rise to 74 points by March 2013, with improvements forecast in all states.

Australian investors have become much more important in driving new residential developments. Resident investors are now expected to account for 33% of the market in the next 12 months (24% in December). This may reflect changes to superannuation rules making it easier to hold property within self-managed super funds

The strongest demand for new residential property remains in inner city housing, low rise and townhouses, where demand is classified as “good”. Demand conditions for CBD apartments, middle/outer ring low rise, townhouses and apartments is assessed as “fair”.

Tight credit conditions are still seen as the main impediment to new residential developments, but housing affordability and rising interest rates are also identified as “significant” constraints.

In the existing property market, resident owner occupiers will continue to dominate demand over the next year, accounting for around 57% of sales. The share of Australian resident investors is expected to be much lower at just 20%.

The best prospects for capital growth in existing property markets over the next year are in the sub-$500,000 category. The outlook for higher priced property is much weaker.

Access to credit has replaced rising interest rates as the biggest impediment for purchasing existing property. Employment security and housing affordability are also seen as “significant” impediments.

Since April 2010, NAB has been conducting the Quarterly Australian Property Survey, with the aim of developing Australia's pre-eminent survey of market conditions in the Commercial and Residential Property market. The large external panel of respondents comprised of Real Estate Agents/Managers, Property Developers, Owners/Investors, Asset/Fund Managers and Valuers.

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