Australia: Housing market sentiment softened noticeably in Q2 - NAB

Analysts at NAB note that Australian housing market sentiment weakens in all states, but gap between best and worst narrows while confidence and price expectations also adjusted down in all states (bar WA).

Key Quotes

“Housing market sentiment (measured by NAB’s Residential Property Index) softened noticeably in Q2. Sentiment fell in all states (led by SA/NT, VIC and NSW), but the gap between the best (VIC & NSW) and worst (WA) narrowed. Confidence also moderated as prospects for capital and rental growth slowed. Property experts are anticipating slower price growth in all states in the next 1-2 years (except WA), but particularly in VIC and to a lesser extent QLD and NSW. WA is tipped to re-emerge as the best state for capital growth after QLD in 2 years’ time. Rents are also set to slow, but will outpace price growth suggesting yields may start widening after a long period of compression, especially in VIC and NSW. FHBs were more active in both new and established property markets in Q2, but local investors retreated as regulators implemented more measures on banks to rein in investor lending.”

“Despite China’s crackdown on capital outflows into overseas property and a raft of new restrictions/taxes on foreign ownership introduced in the 2017/18 federal budget, the share of foreign buyers in new property markets increased to 11.6% (10.8% in Q1), driven largely by VIC where they accounted for 1 in 5 (20.8%) new property sales. NAB Economics has revised down its 2017 housing forecasts based on much softer market sentiment in the NAB Survey and weaker than expected price outcomes in recent months. More modest price growth is also forecast in 2018.”