NAB: House prices to fall up to 15% despite improved outlook

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on July 10, 2020
NAB: House prices to fall up to 15% despite improved outlook

Photo by Yoann Laheurte on Unsplash

New data has reaffirmed NAB's view that house prices will fall between 10% and 15% from peak to trough.

The NAB Residential Property Survey saw housing market sentiment crash in the second quarter of the year, with the index falling to a survey low -33 points, compared to +38 in Q1.

All states saw a decline but the biggest impact was in Victoria and New South Wales, where prices and rents are expected to fall most in the next year. 

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Lender

Variable
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  • Min 30% deposit
  • No monthly or ongoing fees, add 0.10% for offset
  • Unlimited redraws

Variable Home Loan (LVR < 70%)

  • Min 30% deposit
  • No monthly or ongoing fees, add 0.10% for offset
  • Unlimited redraws
Variable
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REFINANCE ONLY
  • A low-rate variable home loan from a 100% online lender. Backed by the Commonwealth Bank.
REFINANCE ONLY

Variable Rate Home Loan – Refinance Only

  • A low-rate variable home loan from a 100% online lender. Backed by the Commonwealth Bank.
Variable
More details
AN EASY DIGITAL APPLICATION
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AN EASY DIGITAL APPLICATION

Neat Variable Home Loan (Principal and Interest) (LVR < 60%)

  • No ongoing fees - None!
  • Unlimited additional repayments
  • Easy online application, find out if you're approved quick!
  • Redraw- Access your additional payments if you need them
  • Use the app to get loan insights to help you pay off your home loan faster
Variable
More details
NO ONGOING FEES
  • No ongoing fees - None!
  • Unlimited additional repayments
  • Easy online application, find out if you're approved quick!
  • Redraw- Access your additional payments if you need them
  • Use the app to get loan insights to help you pay off your home loan faster
NO ONGOING FEES

Yard PAYG Home Loan (Principal and Interest) LVR ≤ 80%

  • No ongoing fees - None!
  • Unlimited additional repayments
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  • Redraw- Access your additional payments if you need them
  • Use the app to get loan insights to help you pay off your home loan faster

Base criteria of: a $400,000 loan amount, variable, fixed, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. However, the ‘Compare Home Loans’ table allows for calculations to be made on variables as selected and input by the user. All products will list the LVR with the product and rate which are clearly published on the Product Provider’s web site. Monthly repayments, once the base criteria are altered by the user, will be based on the selected products’ advertised rates and determined by the loan amount, repayment type, loan term and LVR as input by the user/you. *The Comparison rate is based on a $150,000 loan over 25 years. Warning: this comparison rate is true only for this example and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. Rates correct as of August 10, 2022. View disclaimer.

NAB Chief Economist Alan Oster said the bank had not changed its view that the fallout from COVID-19 would see property prices sharply decline.

"While prices have held up slightly better than expected, they have now declined for two consecutive months across the capitals and we expect this to continue for some time yet," Mr Oster said.

"This easing in prices in Sydney and Melbourne comes after a very strong period in growth from mid-2019 where prices troughed."

Mr Oster said while there had been improved market conditions due to restrictions easing, a V-shaped recovery was unlikely. 

"While the initial COVID-19 related restrictions on housing activity have eased, the economy has undergone a very large contraction, and while we appear to have passed the trough in activity, it will take time for the recovery to unfold," he said. 

"The labour market fallout - and (the) consequent impact on households - will continue to play out over an extended period, which will likely see ongoing government support."

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JobKeeper and JobSeeker to remain, RBA out of options 

Mr Oster said he expected government support measures to remain in place past their September end date, which was vital for recovery. 

"While the unprecedented support provided by the government will likely be wound back in the coming months, we expect support to continue in one form or another," he said.

"That could be a more targeted form of JobKeeper and the retention of a higher unemployment benefit somewhere between Newstart and JobSeeker levels." 

In line with recent comments from the Reserve Bank (RBA), Mr Oster said the cash rate was unlikely to move for years, with negative rates extraordinarily unlikely. 

"With inflation pressure unlikely to build for some time and a long way back towards full employment, the RBA will keep the exceptionally easy stance of monetary policy in place," he said. 

Indeed, mortgage rates are at very low levels.

"The focus will also continue to be on the flow of credit to the areas which need it, but beyond that it appears monetary policy has run its course for now - and we see very little chance of a move to negative rates any time soon." 

The biggest impact on housing markets going forward

At the beginning of the year house prices were set to skyrocket, but the pandemic put an abrupt stop to that. 

NAB surveyed a panel of property experts to understand what would impact the housing market most going forward.

It found the biggest impacts would likely come from rising unemployment and job uncertainty (80%) and consumer confidence in general. 

Around six in 10 also highlighted the difficulties for consumers in accessing finance and the end of government support payments such as JobKeeper and JobSeeker (60%).

Almost half highlighted the impact on demand from lower migration (48%).




Disclaimers

The entire market was not considered in selecting the above products. Rather, a cut-down portion of the market has been considered. Some providers' products may not be available in all states. To be considered, the product and rate must be clearly published on the product provider's web site. Savings.com.au, yourmortgage.com.au, yourinvestmentpropertymag.com.au, and Performance Drive are part of the Savings Media group. In the interests of full disclosure, the Savings Media Group are associated with the Firstmac Group. To read about how Savings Media Group manages potential conflicts of interest, along with how we get paid, please visit the web site links at the bottom of this page.

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Alex joined Savings.com.au as a finance journalist in 2019. He enjoys covering in-depth economical releases and breaking down how they might affect the everyday punter. He is passionate about providing Australians with the information and tools needed to make them financially stable for their futures.

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