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House price growth is about to fade back to its usual levels, constrained by affordability, a lack of development sites, costs and labour shortages.
The latest forecast by NAB group economists showed while 2021 has been a bumper year, with home prices to increase by 18.5 per cent, they tipped house price growth to slow to 3.6 per cent next year.
The research found gains in rents boosted the outlook and, while property professionals’ confidence was elevated, it had softened a little.
The quarterly results did not reflect the recent Covid-19 outbreak, however, Corelogic auction results revealed the market was experiencing its busiest period since 2017.
NAB dwelling price forecasts
| Location | 2019 | 2020 | 2021 forecast | 2022 forecast |
|---|---|---|---|---|
| Sydney | 5.3 | 2.7 | 21.6 | 3.1 |
| Melbourne | 5.3 | -1.3 | 17.6 | 3.5 |
| Brisbane | 0.3 | 3.6 | 19.5 | 4.4 |
| Adelaide | -0.2 | 5.9 | 17.4 | 3.9 |
| Perth | -6.8 | 1.9 | 11.6 | 3.9 |
| Hobart | 3.9 | 6.1 | 23.5 | 4.3 |
| Cap City Average | 3.0 | 2.0 | 18.5 | 3.6 |
^Source: NAB Residential Property Survey, Q2 2021
NAB economists said that in the past six months new housing market constraints had emerged.
“A lack of development sites was again the biggest impediment for new housing development in the country in the second quarter, led by Victoria and NSW,” the report stated.
“The impact of construction costs climbed sharply and it has now emerged as the next biggest constraint, and is ‘very significant’ in WA.
“Issues arising from labour availability also jumped sharply.”
The NAB Residential Property Survey also showed housing affordability was also starting to weigh heavily, particularly on first home buyers.
Hobart’s top ranking performance for house price growth is tipped to outshine most other capital cities into 2022.
Tasmania led the national results, driven by relative population growth, according to the CommSec State of States.
“In a relative sense, and for the sixth quarter in a row, Tasmania holds the mantle of the best performing economy,” the report found.
“There are few signs of Tasmania giving up the position as top performing economy in the next six months.
“The success in suppressing the Covid-19 virus has meant Tasmania hasn’t been forced to lock down its economy to the same extent as other economies, although it has had to close borders.”
The state led the country for equipment investment, employment, relative population growth, dwelling starts and wage growth and came a close second for construction work and retail spending.
