Surveys from two leading banks, the NAB and the ANZ are gloomy on the outlook for house prices in 2010.
In fact, if you look at the contents of the two reports, you’d also have to conclude that the outlook is bad for the banks as well, including the NAB and ANZ.
Flat or sluggishly growing house prices implies sluggish demand for housing finance.
No wonder the banks are busy touting a rebound in business lending this year and into 2012 because it would seem they see no room for growth in housing finance.
The NAB said on Tuesday that conditions in the Australian residential property sector are expected to weaken considerably over the next year.
The NAB said its index fell to 27 points in the December survey, down from 44 points in the previous survey in the September quarter.
And national house price expectations have now turned negative.
"Housing market conditions are expected to fall in all states over the next 12 months.
"Conditions in Queensland are expected to be hardest hit, with the index falling to just 4 points – even before the onset of major flooding throughout the state. Conditions are also expected to be very weak in Western Australia, with the index falling to 14 points, from 46 points in the previous survey.
"Housing market conditions are expected to remain strongest in Victoria & Tasmania, NSW and SA & NT, but forward expectations in these states are down from the last survey."
The Bank said Australian house prices are tipped to fall by 0.5% over the next 12 months, with small increases in Adelaide, Canberra and Sydney offset by falls in Brisbane and to a lesser extent Perth and Melbourne.
Capital growth of houses is expected to outpace that of apartments, with lower value properties (under $500,000) set to record the strongest growth over the next 12 months.
Resident owner occupiers are set to remain the key drivers of demand and will continue to dominate the markets for new and existing properties over the next year, accounting for 48% and 52% of demand respectively.
Demand for new residential developments and existing property is expected to be strongest for houses within the inner city.
Tight credit conditions and rising interest rates continue to be identified as the main impediments to new residential developments and existing property sales.
Adelaide, Brisbane and Melbourne are currently identified as cities with the greatest availability of rental property.
Adelaide is expected to have the greatest rental availability over the next 12 months, with Sydney lagging.
On average, respondents anticipate residential rents rising by 2.8% over the next 12 months and by 4.1% over the next 2 years.
And the ANZ forecast Australia’s home prices to remain flat this year.
The bank estimates house prices will plateau this year, at just over $550,000 on average, as rising interest rates and a strong demand for employees work themselves out in the market.
Australian house prices have jumped from about $460,000 at the beginning of the 2009 to close last year at about $550,000.
However, house prices are starting to flatten out as buyers faced rising borrowing costs and the outlook for the global economy became more uncertain.
ANZ predicted that a shortage of available homes to rent will help spark prices by next year, perking up what’s been a lacklustre construction sector – now disrupted by major flooding across large swathes of the country.
The rental vacancy rate is tipped to fall from 2% in 2010, to under 2 per cent this year, ANZ said.
“Builders will remain cautious while margins are vulnerable to sluggish house prices,” the bank report said.
More construction is needed to stimulate more purchases of homes, which in turn helps push prices higher as overall confidence remains bullish. Additional supply would also help alleviate the nation’s chronic shortage of affordable housing, analysts say.
However, dwelling starts are expected to fall to 131,000 in 2011-12, from 149,000 in 2010-11, before picking up in 2012-13.
This is forecast increase is “a far cry from the 180,000 plus dwellings required to merely stabilise the shortage at its already record high levels”, the ANZ said.
