Growth in house prices and rents slows across Australia
The NAB Residential Property Index declined for the second consecutive quarter in Q3 2024, dropping from +46 points in Q2 to +34.
The latest figure also trails last year’s level of +40 but remains above the long-term survey average of +20.
Sentiment was mixed across Australia, with positive readings in all states except Tasmania, which reported a sharp drop to -28. South Australia showed the highest sentiment, though it slipped by six points to +90. Victoria saw the biggest decrease, falling 26 points to +10, while sentiment in New South Wales, Queensland, and Western Australia also eased. The Australian Capital Territory and Northern Territory were among the few regions where sentiment improved, rising to +14 and +67, respectively.
Confidence among property professionals also softened in the Q3 2024 NAB Residential Property Survey. The one-year confidence measure fell from +62 in Q2 to +47, while the two-year outlook declined to +55 from +60. Despite these declines, both measures remain above their long-term averages, suggesting continued resilience in market activity.
Average expectations for house price growth were revised down to 1.8% over the next year and 2.7% over the next two years. While Western Australia is anticipated to see the strongest growth at 5.8% over the next 12 months, Victoria and the Northern Territory are forecasted to experience slight declines. Over a two-year horizon, positive growth is expected across all states, ranging from 4.9% in WA to 1.4% in Victoria and the NT.
Rental growth has slowed significantly over the past quarter, despite only a modest rise in vacancy rates. The proportion of survey respondents who believe rental markets are undersupplied dropped sharply, especially in New South Wales and Victoria.
Average national rent growth expectations for the next 12 months and two years were revised down to 2.3% and 2.6%, respectively. The ACT is projected to see the highest rental growth at 4.4% over two years, while Western Australia is expected to see a more modest increase of 1.5%.
Meanwhile, first-home buyers (FHBs) saw a reduced presence in the new housing market, with their share falling to 29.9% in Q3. Sales to owner-occupiers (excluding FHBs) rose to a 13-year high of 44.3%, as local investors also became less active, holding a below-average 17% market share. The share of foreign buyers in new housing fell for the third consecutive quarter to 6.8%, with activity remaining above average only in New South Wales.
Construction costs remained a major barrier to new housing developments, cited by 83% of property professionals surveyed, with concerns particularly high in Queensland, New South Wales, and Victoria. Other notable challenges included delays in obtaining planning permits and labour shortages, especially in NSW and QLD.
In established home markets, owner-occupiers (excluding FHBs) accounted for the largest share of buyers at 43.6% in Q3. First-home buyers, including both owner-occupiers and investors, made up 34.3% of purchases, with Victoria reporting the highest share at 40.5%. Local investor activity continued to be subdued, while foreign buyer interest saw a minor uptick to 3.9%, remaining below the survey’s historical average of 5.1%.
Rising interest rates were identified as the primary barrier to purchasing established homes, followed by high property prices, limited access to credit, and lack of available stock. Interest rates were considered the biggest obstacle in Victoria and New South Wales, whereas stock shortages were more concerning in Western Australia and Queensland.
“We have slightly revised down our forecasts for property prices over 2024 with recent monthly prints coming in slightly softer than expected,” said Alan Oster (pictured above), group chief economist at NAB. “We expect broadly similar growth over 2025 to what we forecast in the Q2 Residential Property Survey – namely a softer but still positive rate of growth following the strong growth in prices over recent years. Though price growth has slowed somewhat, underlying demand for property remains strong with the population expected to remain elevated in the near-term.
“More broadly, we continue to see a relatively soft landing for the economy. While growth has slowed, driven by softness in the private sector, we expect H2 2024 to be the low point, with growth returning to around trend over 2025.”
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