News & Media

March 2017 Newsletter


At the end of last year Charles+Stuart was one of 250 property professionals that participated in NAB’s Property Survey for Q4 2016.

According to the survey, during Q4 foreign buyers increased their presence in local housing markets for the first time since late-2015, accounting for an estimated 10.9 per cent of new and 7.6 per cent of established property sales - with buyers noticeably more active in Victoria, and less so in Queensland.

The Australian housing market sentiment was steady in the final quarter of 2016 as more positive expectations for house prices were offset by slightly weaker expectations for rents. On average, survey respondents kept their price expectations broadly unchanged at 1.2 per cent in the next year and 1.3 per cent in two years’ time.

While expectations for price growth were scaled back in NSW and Victoria, they continue to lead the country. In Queensland, prices are expected to accelerate, but remain negative in WA.

NAB Group Economics has lifted its national house price forecasts for 2017 to 3.4 per cent (previously 0.4 per cent). Unit price forecasts were also revised up, to 0.8 per cent for 2017 (was -1.6 per cent).

“Solid market sentiment in the NAB Survey and a surprisingly strong price response to lower interest rates in 2016 has prompted us to revise up our 2017 forecasts, given NAB’s expectation for more rate cuts this year,” said NAB Group Chief Economist Alan Oster. “However, we still expect the housing market to cool noticeably in 2017, especially for apartments.”

There is still considerable uncertainty over the outlook for dwelling prices. In addition to supply concerns, affordability is still a major issue in the best performing markets, while credit conditions have tightened somewhat, especially for foreign buyers and investors.

Considering all of these factors, conditions are expected to soften going forward, contributing to more moderate price growth in the major property markets this year.

“Importantly though, we continue to hold the view that residential property prices are unlikely to experience a severe ‘correction’ without a trigger from a shock that leaves unemployment and/or interest rates sharply higher - a scenario not included in our forecasts,” said Mr Oster.


The NAB findings around house prices are certainly in line with what ratings agency Fitch has revealed in its latest report. Australia’s housing market is in for a 3 to 5 per cent price appreciation this year, the report states.

Housing market conditions in 22 countries were covered in the report. Nineteen of the countries covered were rated as either “stable” or “stable/positive”. Only Canada, Singapore and Greece were given a negative outlook.

While the agency noted the prospect for rapid growth in several markets, it stated a slowdown was “overdue” for some of the hotter markets, such as Australia. “The rate of price increases should slow as home purchases become increasingly expensive relative to household income and rents,” Fitch added.

“Unsustainably rapid price rises in some countries (e.g. New Zealand, Norway, Australia, Canada) are expected to moderate in 2017.”

The report said 2016’s “unsustainable” price appreciation of 10.9 per cent would not be repeated, although first home buyers would still struggle to find a way onto the property ladder, given continued price growth.

“Record low interest rates have helped support price growth while rents remained flat. But tighter lending standards, including limitations on the growth of investment loan portfolios for authorised deposit-taking institutions, have dampened price dynamics,” Fitch said.

“Fitch expects moderate growth in Sydney and Melbourne property prices in 2017, propped up by low interest rates and population growth.”

And while national price growth of 3 to 5 per cent is expected, the regional market may again underperform against the capital cities, particularly Sydney and Melbourne. “Lower growth in regional residential property prices of around 0-5 per cent [is expected], due to falling rental yield pressure, increasing supply and fewer prospects for capital growth for investors,” the agency added.

“Fitch expects dwelling completions to continue to rise nationwide and peak in 2017, acting as a dampener on prices.”

Wage growth has lagged price appreciation for around two years, with the gap swelling since the end of the GFC. This dynamic is not expected to be resolved this year, with wages to still undershoot even if the gap is likely to close.

The agency expects first home buyers to continue to struggle in 2017, as demand for housing remains strong. “Low income growth, tighter underwriting and rising living costs maintain pressure on affordability, even as low rates persist,” the   report said. 

Fitch also noted high household debt would weigh on mortgage serviceability. Mortgage lending is projected to rise broadly in line with prices, with expansion of 5 per cent, compared with 10 per cent in 2016.



And keeping on the survey theme, Westpac’s latest consumer sentiment survey shows that many households are preparing themselves for higher official interest rates, despite the record low official cash rate.

The survey showed that the proportion of people expecting rates to be higher in a year’s time has almost doubled to 60 per cent, compared with six months ago. Of those surveyed, 35 per cent are counting on rates to remain steady and only 5 per cent believe rates will decrease.

Sentiment towards buying a dwelling slumped 7.8 per cent, which is close to the lowest level since the pre-GFC era, when the RBA’s benchmark cash rate was a 7.25 per cent.

Despite the outlook for higher rates, the expectation among those surveyed was that house prices will keep rising. Sixty-four per cent expect a price rise over the coming year, which compares to 39 per cent this time a year ago. In NSW it’s even higher, with 70 per cent of those surveyed expecting higher prices.

While the RBA is widely expected to keep the official cash rate steady at next week’s March Board meeting, some economists believe it may start considering increasing the rate in the second half of the year.

Despite this, the report showed a rise in confidence levels, with households feeling more confident about their family finances compared to 12 months ago – and they’re more likely to make a major purchase such as a new car.

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