WA to lead residential property recovery
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Sentiment towards Western Australia’s housing market fell during the second quarter of 2018 but the state is expected to lead the country for residential property capital growth over the next two years, according to a survey of industry professionals.
The NAB Residential Property survey Q2 2018 released today shows that current market sentiment among property professionals is at its lowest levels in two years, with the index falling by 17 points.
NAB’s Residential Property Index, which measures sentiment based on expectations for house prices and rents, found that the biggest falls in sentiment for June 2018 quarter was in WA and NSW.
About 300 property professionals from across the country participated in the Q2 2018 survey.
Residential Property Index by State
WA was down by 33 to -26, after recording its first positive result in four years in the last Q1 2018 survey.
NSW fell by 27 index points, with the least severe decline in SA/NT, down by 8, a market NAB said was the strongest of all states backed by modest house price growth and strengthening rents.
NAB chief economist Alan Oster said weaker sentiment was evident in all states.
“It turned negative in WA and NSW amid falling house prices and rents. Victoria was also noticeably softer, but remained positive as a pick-up in rents helped offset falling prices,” Mr Oster said.
“Overall confidence levels fell to a new survey low, driven down mainly by NSW and Victoria where capital city house prices declined.”
Mr Oster said property professionals in NSW and Victoria were now the least confident in the country, with all states and territories surveyed scaling back their expectations for house prices in Q2.
Access to credit was considered the most significant market challenge for all areas across Australia, with WA the exception.
For WA, employment security continued to be seen as the major impediment to buyers of existing property.
On a longer term basis, the results were more positive for WA with average survey expectations for house prices over the next two years the highest in the country at 1.8.
Applecross, Armadale, Gosnells, Perth and Scarborough were the WA suburbs tipped to enjoy above average growth in the next 12 months.
Average Survey Expectations: House Prices (%)
Based on average survey expectations, participants anticipated housing markets in WA and Queensland to lead the country for capital growth over the next one to two years.
However, this sentiment differed from NAB’s own hedonic house price forecasts, with NAB estimating Perth’s house prices to continue to decline, albeit at a lower rate.
NAB Hedonic House Price Forecasts (%)*
*Source CoreLogic, NAB Economics
The ANZ/Property Council Survey index, released today, also found that business confidence in the WA property sector had fallen.
The survey canvassed the views of over 900 respondents across major property sectors, including developers, agents and government.
For the upcoming September quarter the index for WA was 139, down from 143 in the previous quarter.
Despite the slight drop, the WA index of business confidence in the property sector is up 25 per cent on the previous year.
Property Council of Australia WA executive director Lino Iacomella said the latest dip in sentiment reflected an industry that was waiting for projects to go ahead before committing to business expansions and employing more staff.
“The industry remains confident that strong economic growth will return in WA and major infrastructure projects like Metronet will lead the way,” Mr Iacomella said.
“Confidence remains solid that house price growth will return soon in WA, however this is predicated on expected up-turn in population growth.”
Mr Iacomella said recent announcements of large mine expansions and developments would also likely boost confidence in the property sector, with the resulting take up of extra space in commercial offices and demand for more factory space in industrial zones.
“The message in these results is that the expected economic recovery in WA will be patchy in the early stages and that governments have an important role in facilitating growth through progressive reforms like introducing Infrastructure WA and local planning reforms to support city-wide projects like Metronet and town centre renewals,” he said.