NAB Predicts Australia’s Housing Market Growth Will Continue Through 2021

The National Australia Bank (NAB) has outlined its predictions for Australia’s property market over the next 12 months. 

In a recent Residential Property Survey, NAB has upped its growth forecasts for both Sydney and Melbourne property markets throughout 2021, while cutting the bank’s predicted growth of Australia’s property market expected in 2022.

The reasoning behind NAB’s price update for 2021 was the rate of home lending in June, which NAB’s home ownership executive Andy Kerr states was the “strongest month on record… a sign of very strong demand.” 

Due to this spike in demand, “NAB has revised up its forecast for house prices in 2021 based on the faster-than-expected growth in prices over recent months,” said NAB’s economists. 

“From here we see the monthly pace of growth slowing but continuing at a solid rate. Affordability constraints will likely begin to bind over the year and see a slowing in price growth as the impact of lower rates fade.”

NAB’s sentiment that property market growth in Australia will slow down toward the end of the year was echoed earlier in the year by the NSW Budget which stated that:

 “Annual house price growth is expected to peak around late 2021. As higher prices encourage more owners to sell, this will work to limit house price growth over time.”

Sydney lockdowns won’t stop property market growth

While many have already predicted that Australia’s property market will continue to rise throughout the year, including the big four banks and leading economists, it may be surprising to hear that the estimations have just been revised upward, given that outbreaks of the Delta variant of COVID-19 have been popping up across the country. 

It may be even more surprising that the capital city that gained the biggest revision in NAB’s growth predictions is Sydney, the city with the highest number of new cases of COVID-19 and ongoing lockdowns which are likely going to be extended. 

NAB estimates that Sydney home prices will grow by 21.6% throughout the year – an increase of 7% over NAB’s prior estimation. 

Contrastingly, the bank only increased its projections for Melbourne’s property by 1.4%, taking it from 16.2% to 17.6% in value increases over 2021. 

Speaking on the increases, NAB economist Alan Oster said: 

“We remain optimistic that as restrictions are eased, activity will rebound, as has been the case in previous lockdowns.”

Moreover, analysis by both KPMG and CoreLogic have found that measures such as low interest rates and other spending incentives that were ramped up during COVID-19 have worked to accelerate Australia’s property market, beyond levels it would have otherwise reached. 

NAB homeownership executive Andy Kerr added:

“Confidence in the housing market continues to improve and that shows in the amount of activity we are seeing through mortgage applications.

“Despite the current lockdowns impacting the lives of many Australians, there is still an appetite for conversations with customers to buy a home. More than a third of appointments in the last week were conducted via video.”

Dwelling value growth to continue throughout the year

According to NAB, “Dwelling prices continued to grow at a robust pace in June, with the combined capitals rising by 1.9 per cent over the month.”

“While slightly below the May pace, monthly growth remained in the range it has been since February. This is also true of Melbourne despite the lockdown over much of the first half of the month, suggesting short-lived lockdowns are unlikely to significantly slow the market.”

Following the current rate of monthly growth, NAB predicts that Hobart will see the biggest property value increases over the year, with the bank estimating a 23.5% rise this year in Tasmania’s capital. 

Sydney is predicted to have the second-largest rise in dwelling values among the capital cities with 21.6%, followed by Brisbane at 19.5%, Adelaide at 17.4% and Perth at 11.6%. 

Collectively, home prices are poised to climb 18.5% across the combined capitals this year, however NAB predicts that this rate of growth will decrease substantially throughout 2022.

In 2022, NAB expects Sydney home prices to grow by 3.1%, Melbourne home prices to grow by 3.5%, Brisbane by 4.4%, Adelaide by 3.4%, Perth by 3.9% and Hobart by 4.3%. 

These predictions are roughly half of what the bank initially predicted for 2022 back in April, and NAB now predicts that the rate of growth across the combined capitals will be 3.6% in 2022 – down from an earlier prediction of 5.8%.

If NAB’s predictions come to fruition, the growth of Australia’s property market in 2022 will be less than a fifth of what is being predicted for this year.