David Scutt* says a NAB survey has found an increasing number of respondents seeing house prices fall faster in the year ahead than in previous forecasts.
Confidence among property professionals in NSW and Victoria has collapsed, dragging overall sentiment across the country to the lowest level in seven years, according to the National Australia Bank (NAB) September quarter Residential Property survey.
“The NAB Residential Property Index fell sharply for the second straight quarter, down 15 points to a seven-year low –9 points, the first negative read since mid-2012,” the NAB said.
“Sentiment was dragged lower by big falls in NSW and Victoria, which offset gains in Queensland, which was the only State to report a positive result.”
Overall sentiment levels in NSW fell to the lowest level in the eight-year history of the survey.
The news was similar in Victoria, where confidence slumped to the lowest level in seven years.
Based on survey responses, there were also a larger number of pessimists in South Australia and the Northern Territory, as well as Western Australia, albeit by only a slim margin.
The NAB said the national result largely reflected the fact property professionals in NSW and Victoria scaled back their outlook for prices in the past three months, particularly in Victoria, where house price falls are now expected to be significantly larger.
“Average survey expectations for national house prices for the next 12 months were cut notably in Q3, and are now tipped to fall 1 per cent, larger than the 0.5 per cent decline tipped three months earlier,” the NAB said.
This was largely due to big downward revisions in Victoria, where house prices are tipped to fall by a much bigger 2.4 per cent, down from 1.1 per cent in Q2, and also by an expected decline of 2.4 per cent in NSW, again larger than the 2.1 per cent slide seen three months earlier.
Over the past year, prices in the State capitals of Sydney and Melbourne have fallen 6.2 per cent and 3.7 per cent, respectively, according to data released by CoreLogic.
Year-to-date, prices have fallen faster in Melbourne, likely impacting the sharp deterioration in sentiment seen in the latest survey.
Like the broader view of property professionals, the NAB is forecasting that prices will continue to fall over the next 18 to 24 months, led by continued declines in Sydney and Melbourne, especially for apartments.
“Weakness in dwelling prices will continue to be driven by Sydney and Melbourne, particularly apartments, although it’s likely Brisbane and Perth will also contribute,” NAB said, adding that it expects values in Sydney and Melbourne to fall 10 per cent and 8 per cent, respectively, peak-to-trough.
“This reflects a bigger fall than previously expected but would still leave house prices well up on 2012 levels.”
However, unlike more pessimistic forecasters, the NAB doesn’t see a risk of a disorderly collapse in prices.
“We see this as a healthy correction which will help offset some of the risk in the household sector against a backdrop of a relatively healthy economy and labour market,” it says.
“Our central scenario does not include a credit crunch event leading to disorderly falls in house prices.”
The NAB said over 300 property professionals participated in the September quarter survey.
* David Scutt is Markets and Economics Editor for Business Insider Australia. He tweets at @Scutty.
This article first appeared at www.businessinsider.com.au.
