The latest NAB survey of property professionals reveals a rather pessimistic industry, with sentiment collapsing both in the short and medium-term:
With Victoria most negatively impacted:
House price expectations have also tanked, with falls predicted over the next two years, with Victoria leading the declines:
Advertisement
The below charts give the longer-term context:
Rents are also expected to fall in 2020 but then rise modestly in 2021. However, Victoria is again expected to experience falls throughout:
Advertisement
The below charts give the longer-term context:
The view from NAB’s chief economist, Alan Oster, remains bearish, still tipping peak-to-trough price falls of between 10% and 15%, with Melbourne faring worst:
Advertisement
Our expectation for house prices over the next 18 months is broadly unchanged. We continue to expect house prices to decline by 10-15% in this episode.
While the impact of COVID-19 has not been as dramatic as first expected, prices appear to have now turned. This comes after very strong growth in Melbourne and Sydney over the past year or so.
Prices have declined in each of the past two months according to the CoreLogic 8-Capital City Index. Melbourne (which turned a month earlier), Perth and Sydney have seen the largest declines…
We expect the declines to be led by Sydney and Melbourne, but we also expect falls – albeit smaller – across the other capitals. Notably, Perth will again decline after having shown signs of stabilising. While all forecasts are highly uncertain at this point and will be heavily dependent on virus outcomes, it is unlikely any part of the country will escape a deterioration in the labour market and the resulting fallout for households.
Slower population growth – with lower international migration – as well as increased supply in the highrise segments will also weigh on prices, particularly in the larger centres. Low rates will be a general support but are likely to be offset by higher unemployment and weaker income growth. That said, we also anticipate a large fall in construction which will see a more rapid stabilisation in prices than otherwise. With approvals at low levels, it will take some time for construction to recover, so in the longer run the balance between recovering migration and the turn in construction will be important for prices…
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.
