Housing sentiment lifts on record foreign demand

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By Leith van Onselen

NAB has released its Australian Residential Property Survey for the March quarter of 2014, which revealed a small rise in sentiment nationally amongst property professionals, with house price expectations also strengthening is all states except Victoria.

Concerns about rising interest rates are starting to rise, whereas employment security continues to be viewed as the biggest impediment to buying property in most states.

The Survey also found that foreign buyers were significantly more active in both the new and established property market, accounting for a record high 13.9% of total new property demand and a record 9.5% of existing property demand.

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Below are the key extracts from the NAB Survey:

NAB Residential Property Index rose +1 to 37 points in Q1 2014, with strong gains in SA/NT and NSW offsetting declines in Victoria and WA (where housing market confidence has clearly waned over the past year). Respondents from Queensland remain most confident over the next 1-2 years, while confidence was scaled back most in Victoria and is weakest in WA.

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Outlook for house prices over next year stronger in all states, except Victoria. Price growth tipped to be fastest in Queensland (3.5%) and NSW (3.3%) and slowest in Victoria (2.2%) and SA/NT (2.2%). Queensland (4.4%) to lead the country for capital gains in 2 years time, with expectations pared back in Victoria (2.4%), where expectations are now weakest overall.

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National rental growth was broadly unchanged in Q1 2014 (0.5%), but faster capital growth suggests that yields are still eroding. Rental growth was fastest in NSW (1.4%) and weakest in WA (-1.2%), where the leasing market is clearly feeling the pinch from the slow down in mining investment. Softer income returns are tipped for most states over the next 1-2 years, with NSW and Queensland expected to provide the best returns.

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Big increase in foreign buyer activity in new housing market, reaching all time high of 13.9% of national demand. Foreign buyers especially active in Queensland (24.4%).

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There was [also] a big increase in foreign buyers in the established property market during Q1 2014, reaching an all time high of 9.5% of total demand nationally. Foreign buyers were most active in NSW, with their involvement in the market rising from 7.6% in Q4 2013 to a high of 12.7%. Foreign buyers were also more active in the market in Victoria (10%) and Queensland (9%). Australian resident investors also increased their exposure to established property during the quarter, despite a pullback in NSW (27.3%), with this mainly due to higher investment activity in Victoria (24.6%) and Queensland (26.7%).

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Credit availability and housing affordability still the biggest concerns in the new property market…

Employment security remains the biggest impediment to buying existing property in all states except NSW, where a lack of stock is seen as the biggest impediment.

It’s worth noting that the estimates of foreign buying activity is far in advance of recorded statistics. The full Survey can be downloaded here.

[email protected]

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About the author
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.