Invest
NAB predicts sharp slowing of property prices in 2022
The bank has revised its price forecasts for both 2021 and 2022.
NAB predicts sharp slowing of property prices in 2022
NAB has upgraded its property price growth forecasts for 2021 and 2022 in its latest quarterly property report.
The bank now expects growth of 22.7 per cent nationally in 2021 compared to its previous forecast of 18.5 per cent, on the back of stronger-than-expected outcomes in recent months.
Meanwhile, dwelling prices in 2022 are expected to rise by a slim 4.9 per cent, but marginally higher than the previously forecast rise of 4.3 per cent.
“Overall, that sees a very strong print for house prices in 2021 but a sharp slowing in 2022 as the impact of lower interest rates fades and affordability constraints begin to bind,” NAB said.
“Our outlook is generally similar across states, but the relative performance in the year to date sees Sydney and Hobart print very strong outcomes, with Melbourne and Perth seeing softer (but still strong) outcomes.”
According to NAB, Hobart will top full-year growth in 2021, posting an increase in dwelling price of 28.4 per cent, followed closely by Sydney with 27.5 per cent. Brisbane is expected to come in third with 23.2 per cent, while Perth is predicted to occupy the last place with subdued growth of 14.5 per cent.
NAB is not the only big bank to revise its dwelling price forecasts.
Just recently, Westpac predicted a lift in prices of 22 per cent in 2021, up from an earlier prediction of 18 per cent. However, the bank is more optimistic about growth in 2022 and anticipates a gain of 8 per cent compared to its previous forecast of 5 per cent.
“We still expect momentum to slow considerably through 2022 as stretched affordability — combined with macro-prudential tightening measures and, later in the year, the anticipation that the Reserve Bank will begin a tightening cycle in early 2023 — begins to weigh on confidence,” Westpac said last week.
NAB also commented on the recent action by the Australian Prudential Regulation Authority to widen the interest rate serviceability buffer from 2.5 per cent to 3 per cent as well as the potential for further macro-prudential measures.
“The impact of this will be to reduce the debt capacity of the typical borrower by 5 per cent — and the assessment for now is that this will not see a large impact on lending or the property market,” NAB said.
“However, macro-prudential policies are rarely used in isolation and we remain alert to the possibility of further measures around the turn of the year, likely in the form of high DTI or LVR speed limits.”
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