Chinese property buyers fading

From the new quarterly NAB property industry survey:

NAB’s Residential Property Index fell to +1 in Q4 (+10 in Q3) and is now well below its long-term average (+13). Sentiment weakened in most states, especially NSW & QLD. VIC also softer, but strongest overall (replacing NSW) and currently the only state still tracking above its long-term average. Sentiment fell further in SA/NT and remains very weak in WA.

 Average house price expectations were scaled back in most states bar WA (but still negative). Highest capital growth expected in QLD & VIC next year with prices flat in NSW and falling in WA & SA/NT. QLD to lead for capital gains in 2 years’ time.

 NAB has also lowered its house price forecast for 2016 to 1% (from 2.3%), with weaker expectations for all capitals (led by Sydney & Melbourne). Unit prices are tipped to fall 1.2%, with flat to falling prices in all capitals (see page 8 for more detail) .

 Australian investors were less active in the markets for both new and established property. This was particularly apparent in established housing markets, where their share of total demand fell to a survey low 19.2%, from a survey high 25.2% in Q3’14.

 At a national level, foreign buyers were also less prevalent in Q4, accounting for 14.4% of all new property sales (15.7% in Q3) and 8.6% in established markets (9% in Q3). Activity weakened in most states, except QLD, where foreign buyers accounted for 20.9% of new property sales (17.7% in Q3) and 8.9% of established properties (7.6% in Q3).

 Foreign buyers were notably less active in VIC, where their share of total new property sales declined to 16.4% from 25.2% in Q3. In established markets, it fell to 8.6%, down from a survey high 15% in Q3. There was less change in foreign buyer activity in NSW – 11.7% for new property (13.6% in Q3) and 9.4% in established markets (9.7% in Q3).

 Overall, around 53% of foreign purchases of Australian residential property were for apartments, 32% houses and 16% for redevelopment purposes. But these ratios continue to vary widely by state. In QLD, for example apartments accounted for 61% of all foreign purchases in Q4 (56% in Q3) – by far the biggest share among the main states.

 The largest share of apartments (42%) bought by foreigners were valued between $500,000-1 million. Over 11% were valued at more than $ 2million. Again, there are some interesting differences across states. For example, VIC had the biggest share of property sales both below $500,000 and above $5 million.

 In the housing market, around 53% of houses purchased by foreigners in NSW and 58% in VIC were valued at less than $1 million, compared to 72% in QLD and 79% in WA.

So, property price expectations are falling fast and NAB’s 1% growth call looks a bit silly. The good news is foreign buyers are waning as well though there is clearly some kind of stupid swing from Melbourne to Brisbane on. This is Q4 last year so we should expect new limits in both China and Australian to bite much harder this year.

Unfortunately new property sales were also hit but are still running OK.

Full report.