Foreign buyers are returning to the Australian market following a drop in numbers in 2022, according to a new property report.
The NAB Residential Property Survey Q1 2023 found that in the first quarter of the year, foreign buyers comprised 7.9 per cent of sales in new housing markets, up from 5.2 per cent in the previous quarter.
However, numbers still remain below the historical 9 per cent average.
Foreign buyers were most interested in NSW, where numbers increased to 16.2 per cent – the highest level in eight years.
While Western Australia also saw an above-average increase to 7.9 per cent and Queensland saw a modest rise to 7.5 per cent.
Victoria’s market share of foreign investors fell to a two-year low of 4 per cent.
The report also found that foreign buyers’ market share in established housing markets also increased, rising to 3.8 per cent, up from 2.8 per cent in Q4 2022.
However that figure remains below the 5.2 per cent average.
Increases were seen across all states but remained below average.
Housing market sentiment also improved in several states, with the Northern Territory, Western Australia, and South Australia leading the way.
Sentiment in Victoria turned positive after falling in the previous two quarters, while Queensland remained unchanged.
However, sentiment fell in NSW, the ACT and Tasmania.
Confidence among surveyed property professionals improved slightly in the first quarter of the year, but expectations point to a slow housing market recovery over the next few years.
The one-year confidence measure increased to +15 points, while the two-year measure rose to +33 points – both well below average.
Housing market confidence for the next 12 months is highest in the Northern Territory and Western Australia, with positive levels in most other states.
Confidence is lowest and further negative in the ACT.
The NAB Residential Property Index rose slightly to +9 points in the first quarter of 2023, up from +5 points in Q4 2022, but still below the +17 point average.
Solid rental growth supported the positive index result despite continuing home value declines across the country.
NAB Economics expects house prices to fall a further 3.5 per cent before entering a period of stagnation, resulting in a 4 per cent decline by the end of the year.
The peak-to-trough decline is anticipated to be around 12 per cent, compared to previous expectations of a 20 per cent decline.
They expect Sydney (4.9 per cent) and Melbourne (6.2 per cent) property prices to bounce back the most next year, while Perth (1.2 per cent), Brisbane (2.4 per cent) and Adelaide (3.7 per cent) will see modest increases.
Reduced borrowing power due to rising interest rates has been the primary driver of declining dwelling values according to the report.
However, stronger population growth, a tight rental market and a robust labour market are helping to offset higher borrowing costs.
The Australian economy is expected to slow as higher rates and inflation weigh on household consumption, leading to a deteriorating unemployment rate and steady wage growth consistent with target inflation.