NAB’s quarterly Residential Property Survey, which seeks to measure confidence in the residential property market, is out and has improve 5 points since the December quarter. Does this tell us anything? NAB thinks so:
The NAB Residential Property Index rose to +5 points in March. WA now the best performing state and Victoria the weakest. WA expected to out-perform over next 2 years. Victoria continues to lag but overall conditions weakest in SA/NT by March 2014.
National house prices fell -1.3% in March (-2% in Q4’11). Prices down in all states with WA (-0.1%) the best and Queensland (-2.4%) the worst. National house prices tipped to fall -0.2% over next year and grow 1.6% over next 2 years. WA the standout for price growth. Victoria the most pessimistic state.
Nationwide house rents increased 1.1% in Q1’12, but there was a notable softening in rental markets in SA/NT and Victoria. National rents forecast to climb 2.9% over the next year and 4.3% over next 2 years.
Rental returns forecast to be strongest in WA and NSW.
First home buyers and resident investors less active in the market for new property, but overseas buyer activity increases. Demand for new property still strongest for inner city houses and low rise apartments/townhouses.
Tight credit conditions and housing affordability cited as the most “significant” constraints on new housing development. Lack of development sites and construction costs becoming problematic, especially in WA.
Overall demand for existing property improved slightly. Houses still the most preferred type of property, especially in the inner city. Low and high rise middle ring apartments/townhouses the least preferred option for existing property buyers.
Capital growth expectations remain strongest for existing property in the sub-$500,000 price range.
Outlook for premium property remains “poor”.
Access to credit still viewed as the biggest impediment to purchasing existing property but the level of concern is being slowly pared back. Employment security has emerged as the next biggest concern, with Victoria the most pessimistic state.
So, these trends do seem to reflect current realities in the property market. There is a growing awareness of VIC’s vulnerability, NSW’s temporary boost on the FHB grants and WA’s intrinsic strengths. The question is is this any good as a forecasting tool?
I have my doubts. I have actually done similar surveys in the past and found them just as I’ve described above, generally reflective of current conditions and readily shifting as those conditions alter, not in the least predictive. The surveys I did were with punters which may or may not be better than this survey of industry insiders and property holders. Objectivity may be counter-balanced by expertise for instance.
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Fact is, though, this survey result is the reverse of my own view, which is that in the short term (this year) there is some hope of small property price increases in the second half if China bounces, the rate cuts flow and the banks pass them on. But longer term I see capital gains much like unicorns and rainbows. Either global recovery kicks in and rates rise or it doesn’t and the conditions generating savings caution persist regardless of rate cuts.
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal.
He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.
