The National Australia Bank (NAB) has released the results of its regular residential property survey, with respondent sentiment being the lowest in New South Wales. The survey is completed by 250 real estate agents, property managers, asset & fund managers, owners and investors.
The survey reflected a +1 growth in expectations for the residential property market which has had an average of +13 in recent times. Victoria achieved the highest sentiment rating, however, respondents also felt that Queensland would see the highest price gains in the next two years, which could reach as high as 2.7%.
New South Wales is expected to see no growth in that time and a national increase of approximately 1%.
Many publications are pointing to a reduced supply of home buyers, who have been scared off by the rapid increases in pricing in the past 12 months, as a forecast of a severe price correction looming. This is typically found in metropolitan areas like Sydney.
However, analysts are suggesting that for a high impact price correction to occur additional factors need to be in play. For instance, if foreign investors suddenly sold their Australian real estate, creating a vast increase in supply of residential property, this could trigger a high price correction.
The NAB survey also shows a decrease in activity from foreign investors, whose investment slowed by 1.3%. This is to be expected due in part to the new regulations handed down by the Australian Prudential Regulation Authority (APRA) which introduced new rules for foreign buyers which required them to pay a $10,000 fee to be eligible to bid for a $1 million property and $5,000 for properties valued below $1 million.
Chinese investment has also decreased due to tighter regulations placed upon citizens from the Chinese government. The regulation has been that Chinese nationals are not permitted to take any more than US$50,000 off shore in a year. However, this has never really be enforced. However, due to China’s concern over its own inflation rates the regulations have been tightened and more regularly enforced.
The survey also seems to suggest that foreign buyers are also turning away due to a coming oversupply of apartments. In 2014/2015 a record 19,450 apartments began construction, this figure only accounts for dwellings in buildings that are four storeys and above. Almost 55% of foreign investment has been in apartment purchases. With all capital cities investing heavily in new apartment and high-rise living spaces, this result makes some sense.
If this is indeed the case, we will expect to see a downward shift in apartment prices over the coming months. The NAB survey predicts a drop by 1.2%.