A quick run through on today’s update.

Summary The NAB residential property index fell to +46 in Q2 2024, but remains above its long-term average of +20. South Australia and the Northern Territory showed mixed performance, with South Australia leading with a jump to +96 and the Northern Territory increasing to +60. Tasmania continued its downward trend, falling to -43 from -20, reflecting weaker demand in that state. Despite regional differences, overall confidence among property professionals dipped slightly, with NAB’s one-year confidence measure dropping to +62 and the two-year measure to +60. Major challenges include rising construction costs and planning delays, with 76% of property professionals identifying these as significant barriers. NAB revised its forecast for property price growth in 2024, expecting capital city dwelling prices to rise by around 7%, but growth is expected to slow to 4% in 2025. The market share of foreign buyers in new Australian housing markets continued to decline in Q2, with New South Wales holding the largest foreign buyer market share at 15%. Rental markets continue to experience high demand, with growth forecast at 3.5% over the next year and 3.8% over the following year.

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In Q2 2024, the NAB residential property index decreased from +57 in Q1 to +46.

Despite the fact that this represents a decline, the index continues to be considerably higher than its long-term average of +20, indicating that the market is still resilient in the face of numerous challenges.

“Despite the fact that there is some cooling in specific regions, the index is still trending significantly above the average, says the chief economist of NAB group.

Regional Property Markets in Australia: Mixed Performance

Performance varied widely among regions. The Northern Territory experienced a significant increase from 0 to +60, while South Australia led the pack with a rise to +96 (up from +67).

Nevertheless, Tasmania’s downward trend persisted, with a decrease from -20 to -43, which is indicative of a decrease in demand in the state.

The ACT remained stationary at 0, with no movement. Nevertheless, the overall confidence of property specialists experienced a modest decline, with NAB’s one-year confidence measure decreasing to +62 and the two-year measure to +60, despite these regional variations.

Despite these minor decreases, both figures continue to exceed the long-term survey averages, indicating that optimism persists in the face of persistent obstacles.

Main Challenges Affecting the Market

According to the NAB report, the Australian property market is confronted with a number of significant obstacles, including construction costs and planning delays, which are the most significant obstacles for new housing developments.

Property professionals in New South Wales (82%) and Victoria (79%) identified escalating construction costs as a significant barrier, with a staggering 76% of respondents making this assessment.

“Construction costs are perceived as a substantial obstacle by approximately three-quarters of property professionals,” according to an expert.

The dearth of stock in established housing markets, particularly in NSW and VIC, is a developing concern, and purchasers are still facing challenges due to the increasing interest rates.

Updated Property Price Predictions for 2024 and Beyond

NAB has updated its projection for the development of property values in 2024, anticipating a 7% increase in capital city residence prices compared to its previous projections. However, it is anticipated that growth will decrease to 4% in 2025.

Experts have anticipated a slight decrease in price growth in 2025, despite the fact that demand continues to exceed supply, particularly in Perth, Brisbane, and Adelaide.”

Rental market trends and foreign purchasers

In the second quarter, the market share of foreign purchasers in new Australian housing markets continued to decline, falling to 8.9%, which is below the long-term survey average of 9.1%.

New South Wales continues to have the highest percentage of foreign buyers in the market, at 15%, which is significantly higher than the national average of 8.7%.

Rental markets continue to be in high demand, with growth projected to reach 3.5% in the upcoming year and 3.8% in the subsequent year.

NAB reported that rent growth is anticipated to accelerate in VIC, SA, and the ACT as demand continues to exceed supply throughout the nation.

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