NAB Predicts Housing Price Growth to Sharply Turn by the End of 2022

The house price growth will moderate in late 2022, tips the big four banks of Australia in connection with the Reserve Bank of Australia rising the case rate.

Philip Lowe, RBA governor admitted for the first time this week that interest rates may rise later this year. In tandem with the decision by RBA, NAB revised the dwelling price forecasts. 

CBA and Westpac believe that RBA will raise the cash rate from August 2022 while ANZ suggests a September commencement. NAB economists expect the first rate hike from the RBA will occur in November, a steady series of hikes coming through 2023 and 2024.

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Compared with the current cash rate of 0.1 per cent, NAB predicted a 65 point rise by February 2023. 

Commonwealth Bank economists expected the pace of lending for housing and dwelling price gains to moderate in 2022.

CBA economists Belinda Allen and Kristina Clifton reported, "The risk is a faster slowdown given we expect the RBA to lift the cash rate in August 2022".

The National Australia Bank economists also expect dwelling prices will rise around 3% in 2022 before declining by around 10% in 2023. They consider this to be a relatively orderly decline after a sharp growth upwards in prices over the last year (22 per cent rise). 

Alan Oster, NAB chief economist stated in a research note, 

“We have brought forward the timing of the correction we expect at house prices to late 2022 as affordability constraints begin to bite and rising mortgage rates place downward pressure on prices.”

“This would offset gains seen in early-2022 so that overall prices end the year roughly flat.”

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NAB expected the price growth in capital cities to be weaker than the national average. Although larger declines would appear in Sydney and Melbourne with NAB forecasting a drop of 11.4 per cent for both the cities, Brisbane and Adelaide will also see a significant fall in price growth. 

However, the decline forecast in the capital cities for 2023 is speculated to be low at -9.3 per cent.

As for Perth, a 4.2 per cent rise is expected in 2022 with an 8.1 per cent drop in 2023. Followed up by Brisbane with a rise of 4.1 per cent with a 6.4 per cent decline in 2023.

According to Mr Oster, the declines aren’t “disorderly” as the labour market is predicted to stay strong with wages growth to pick up and mortgage rates still low.

The economy is expected to grow by around 3.6 per cent in 2022 and by 2.5 per cent next year, the unemployment rate will decline even further. 

Wages growth will pick up and strengthen. Once the wage pressures build, RBA will ensure that inflation remains within the target band i.e. 2 to 3 per cent. If not, the RBA will raise the cash rate. 

Why is credit accessibility a concern?

The rising costs for construction amid labour shortages and supply chain constraints are significant impediments to the new housing schemes. Along with that, the sharp rising rates in the December quarter are the causes of concerns over access to credit. 

Property professionals have identified the lack of stock and price levels are the biggest hurdles to the buyers nationally. While lack of stock was a bigger issue in Western Australia, the price is a larger focus for buyers in Victoria and NSW. Both issues impacted the Queensland buyers.

NAB’s Residential Property Index eased to 59 points in the December quarter, slightly down from the 60 points in the September quarter but above the average 16 points. The declining property price growth pushed the index down from a high of 71 points in the June quarter.

NAB predicts that the index will keep declining and hit 56 points in one year and 47 points in two years. Due to the decline in property price growth, the market confidence among real estate professionals has also moderated.


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