Price drops set for 2023: NAB
The bank has doubled down on its prediction that house prices will decline by 10 per cent in 2023.
NAB’s latest quarterly report on residential property prices has bolstered the position of its economists that house prices will see an overall rise of 2.5 per cent this year before falling back in the 12 months following.
They concede that house prices in Melbourne and Sydney turned more quickly than had at first been anticipated, but noted that capital city prices had been bolstered overall by performance in the smaller state centres.
“We expect growth to slow in Brisbane and Adelaide, before turning negative at the back end of 2022, alongside falls in the larger capitals,” the bank’s economists said.
The latest figures have added to the bank’s confidence that the RBA will begin steadily increasing rates from June this year, taking the cash rate to 1 per cent by year’s end and 1.75 per cent by the end of 2023.
NAB’s economists noted that Australians seem adequately placed to accommodate rising mortgage payments.
“Overall, household balance sheets remain in good shape and the savings rate is still elevated, suggesting households will be able to adapt to higher interest rates,” they said.
And they called the anticipated price drops an “orderly correction in house prices with the economy and labour market continuing to perform strongly and wage growth strengthening”.
Rising rates, however, are likely to become an impediment for new housing development in all states, the bank noted. Established home buyers will also find the equation for what they can afford changing, with rising rates “impacting these buyers more than at any time over the past 10 years”.
But first home buyers who intend to take up residence in their property purchases appear to be the demographic pulling back already.
NAB’s latest survey of housing sentiment indicated their share of total sales in new housing markets dipped to a two-and-a-half-year low of 29.3 per cent in Q1. Sales in this segment to owner-occupiers who already owned property, meanwhile, moderated to 28 per cent from 30.8 per cent in Q4 last year.
For established dwellings, first home buyer activity fell sharply from 35.3 per cent in Q4 last year to 29.8 per cent in the first quarter of 2022. The market share of other owner-occupiers rose to a seven-and-a-half-year high of 48 per cent, up from 43.3 per cent at the close of last year.
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