The National Australia Bank (NAB) Residential Property Index hit a new low in the last quarter of 2018 — down 11 points to -20. The index is now well below its long-term average level (+12).
“This very poor result was not unexpected given what’s been happening on house prices,” said NAB Chief Economist Alan Oster.
Victoria (VIC), which was down 21 to -28, and New South Wales (NSW), which was down 13 to -50, caused the overall index to drop as the weakening condition of prices in Melbourne and Sydney worsened.
NAB’s survey also found that confidence slid well below average levels, which implies that market momentum may moderate even more.
Sentiment declined in Queensland, but it was the only state to post a positive reading—down 13 to +8. South Australia and Northern Territory’s sentiments, together with and Western Australia’s were largely unchanged at very weak levels.
Moving forward, property professionals are expecting more significant price drops in NSW and Victoria over the next one to two years, while values are anticipated to stay flat across the rest of the country.
NAB is predicting house values to decrease even more over the next year or so. This is considering the recorded peak-to-trough declines of nearly 15% in Melbourne and Sydney.
Perth is likely to log small declines, while the remaining states will hold steady. Declines are expected to remain orderly and price movements on the east coast to date are deemed a healthy correction to the previous large increase in prices, said NAB.
The adjustment so far has happened against a relatively healthy macroeconomic backdrop and this is likely to be retained.
“That said, further tightening in credit conditions and weaker price expectations in the investor market could likely further weigh on prices,” said Oster.