ONE of the country’s Big Four banks has predicted house prices will slow next year but ruled out any sharp correction, saying only a major economic shock could trigger a downward spiral.
National Australia Bank today lifted its residential house price forecast for 2016 – from 1.5 per cent to 5.1 per cent – but warned it expected the market to “cool appreciably” next year.
“Residential property prices are unlikely to experience a severe ‘correction’ without a trigger from a shock that leaves unemployment and/or interest rates sharply higher – a scenario not included in our forecasts.”
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Among cities where the momentum was expected to be taken out of prices rises were Brisbane, Melbourne and Perth – but Brisbane was also expected to deliver the highest house price rise in 2017 at 1.9 per cent.
The latest NAB Residential Property Survey, out this morning, picked Queensland and Victora for the best capital returns in the country over the next two years.
NAB Chief Economist Alan Oster said the eastern seaboard was expected to remain strongest this year, but the strongest risers Sydney and Melbourne were not expected to “out perform” into 2017.
Hobart was expected to shift down a gear but its low prices compared to other capitals were expected to support demand in the Tasmanian capital.
“Brisbane house price growth will also slow, particularly if foreign demand continues to wane, while the Adelaide market will cool a little as well. Perth will remain very weak.”
NAB also expected apartment prices to fall into next year across the capitals including a 1.5 per cent drop in Sydney – but pent-up demand and rising unaffordability of houses were wildcard factors that could help the NSW capital buck the prediction.
“For 2017, prices are expected to be flat-to-falling across most capital cities. The worst declines are forecast to again be in Perth (-5 per cent), as well as Melbourne (-3.5 per cent) and Brisbane (-1.8 per cent).”
He said while the decline in Perth was linked to economic conditions, “falls in Melbourne and to a lesser extent Brisbane are partly attributed to added supply and weaker investor demand”.
The lowest rental yield for houses in the country was out of Melbourne, which also had a very low yield for units.
Original article published at www.news.com.au by Sophie Foster 15/7/16