National Australia Bank’s (ASX:NAB) Director of Economics, Gareth Spence, and Head of Valuations, Mark Browning, have both weighed in on Australia’s housing market.
The bank held a national state-by-state webinar with dynamics in each state addressed, ultimately finding that major capital city prices continue to rise while regions remain mixed.
The bank also highlighted that house price growth is staying ahead of income growth, suggesting those on the wrong side of Australia’s property divide will be even further locked into renting.
NAB expects house prices to continue climbing, too, reaching new heights in November. This comes as post-COVID supply remains depressed and demand remains strong.
It also comes as immigration to the country continues to rise.
Two Australias, but one market
House prices in some regional areas of Australia match those in capital cities, while those in less desirable locations are a very different story.
This won’t surprise anybody keeping track of the slow, broad-based decline of Australia’s inner ex-manufacturing and ex-industrial towns.
There’s a reason small centres are outraged by the oceanic live sheep export ban.
A collapse in live export purchases would have predictable knock-on effects – the eventual whittling away of life in Wheatbelt towns. Local economies rely on that industry, according to Mercado data.
House Value Index continues to climb
The latest data showed Adelaide house prices climbed the most in the September quarter, clocking the largest capital gain of 4.3 per cent.
Brisbane came in second at 3.9 per cent, and Perth came in third, at 3.6 per cent.
CoreLogic’s national home value index (HVI) climbed 0.8 per cent in September alone, with the quarterly growth rate hitting 2.2 per cent.
NAB noted that since hitting a “trough” in January, the index has recovered 6.6 per cent. Further, NAB expects the HVI to hit a nominal high in November as house price relief remains elusive.
Supply-side story continues
Upward pressure on house prices, CoreLogic chief Tim Lawless noted, remains a supply-side story.
“We have seen vendors becoming more active through winter, which is seasonally unusual,” he said.
“However most of this fresh stock is being absorbed by the market, with the count of total capital city listings rising by only 3.6 per cent over the past two months, despite the flow of new listings jumping 12.9 per cent.”
Three cities where supply is down 40pc
Adelaide, Perth and Brisbane clocked the largest jumps in house prices. Those three same capitals are where advertised supply remains the lowest; 40 per cent below the five-year average.
There were some small flecks of good news in CoreLogic’s latest update – rental growth has shown a bite-sized slowdown in growth.
This came even as rental vacancies continued to tighten; analysts attributed the decline to a jumping-ahead of housing values ahead of rents.
However, rental vacancies remain historically low, and despite prices falling, the declines are ultimately flattish in nature.
Economic takeaways
In a reassurance to Australia’s banking system, NAB doesn’t expect to see a shock jump in mortgage defaults – unless unemployment unexpectedly jumps.
CoreLogic, however, expects to see mortgage stress continue to increase. Its analysts are hopeful disinflation can act as a magic pill to historically low sentiment.
But the record-low unemployment rate isn’t set to go away any time soon. As a huge portion of Australia’s working age population retires, the overall supply of available workers will continue to shrink.
Something for the bears, too
It also notes that we’re starting to see a “subtle rise in total listings in some regions which has supported a deceleration in value growth.” Just hope you’re in the right region.
NAB didn’t shy away from bearish commentary either.
“A housing undersupply looks set to worsen before it gets any better,” the bank wrote in its October report.
“Apart from the early COVID dip, annual dwelling approvals haven’t been this low since 2013.”