Sentiment in the country’s housing market weakened last quarter, an Index revealed.
National Australia Bank (NAB) said sentiment in the country’s housing market weakened in Q2 2017 after it reached a three-year high in the previous quarter, reported The Australian.
While the lender’s Residential Property Index showed that optimism in the market declined by 17 points to 14 in Q2 2017, it believes that pent-up demand remains healthy, leading to a soft landing.
The gauge hit its lowest level since mid-2016 and confidence in the housing market declined across all Australian states. Nevertheless, the gap between the most upbeat and pessimistic areas narrowed.
“Falling confidence reflects weaker expectations for both house prices and rents,” said Alan Oster, chief economist of NAB.
This year, the lender forecasts that home prices will increase by five percent compared to an initial projection of 7.2 percent, while unit prices are predicted to rise by three percent versus a preliminary estimate of 6.8 percent.
In particular, units in Hobart and Sydney will perform well in 2017, while those in other states will likely experience declines. As for home prices, Melbourne and Sydney will continue to post the highest growth, while Perth will record the smallest rate of increase.
By 2018, unit prices are likely dip by 0.3 percent, while detached houses could see a gain of 4.3 percent.
According to Oster, first-time home buyers were more active in the market during Q2 2017 as property investors were impacted by the government’s lending curbs.
Despite China’s restriction on money outflows and Australia’s tighter rules on overseas buyers, Chinese nationals and other foreigners have been snapping up residential properties.
“This along with record levels of housing construction activity (mainly apartments) and moves to limit foreign demand for housing will likely limit the potential for future price gains,” he noted.
“However, there are still a number of positive elements supporting the market, which will likely see an orderly adjustment rather than a sharp correction,” added Oster, referring to the low interest rates and “quite large” pent-up demand in Melbourne and Sydney.