Confidence in the real estate market remains high despite slowing growth in property prices, according to a new survey.
The latest NAB Residential Property Survey has found that sentiment is highest in Western Australia and the Northern Territory while it is the softest in Victoria.
Overall the NAB Residential Property Index remained steady at +58 points in the first quarter of 2022, down just one point from the final quarter of 2021, boosted by solid rents even as house price growth softened.
The bank has predicted further price growth this year, before slowing in 2023.
“Our outlook for property prices is broadly unchanged in annual terms – where we expect an overall rise of around 2.5 per cent this year, before prices decline by around 10 per cent in 2023,” the survey said.
“Overall, the housing market has turned slightly quicker in Sydney and Melbourne than we had expected in early 2022 but out-performed in the smaller capitals.
“We expect growth to slow in Brisbane and Adelaide, before turning negative at the back end of 2022, alongside falls in the larger capitals.”
NAB said it expects the Reserve Bank of Australia to take the cash rate to 1 per cent by year’s end and 1.75 per cent by the end 2023, which will slow property price growth.
“It is important to note that we see this as an orderly correction in house prices with the economy and labour market continuing to perform strongly and wage growth strengthening,” the survey said.
“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.”
With interest rates widely tipped to start rising this year, property professionals also identified rates as a growing impediment for new housing development in all states, and a bigger challenge for established home buyers, with interest rates now impacting these buyers more than at any time over the past 10 years.
The survey also said rents were likely to grow well above average levels and outpace price growth in all states.
The expectation is for rents to rise 4 per cert in the next two years across the nation, led by the Northern Territory with an increase of 5 per cent.
First home buyers continue to be active in new housing markets, however, the survey suggests their share of total sales dropped to a 2½-year low of 40.5 per cent in the March quarter.
While the market share of foreign buyers increased to a near two-year high of 7.9 per cent nationally, in line with the reopening of international borders.