Conditions in the Australian residential property sector are expected to weaken considerably over the next 12 months, according to NAB’s Residential Property Index.
The index fell to 27 points in the December survey, down from 44 points in the previous survey.
In addition, national house price expectations have now turned negative.
NAB’s chief economist Alan Oster said house prices should fall by at least 0.5 per cent over the next 12 months, with small increases in Adelaide, Canberra and Sydney offset by declines in Brisbane and to a lesser extent Perth and Melbourne.
Mr Oster also expects capital growth of houses to outpace apartments, with lower value properties (under $500,000) set to record the strongest growth over the next 12 months.
“Resident owner occupiers are set to remain the key drivers of demand and will continue to dominate the markets for new and existing properties over the next year, accounting for 48 per cent and 52 per cent of demand respectively. Demand for new residential developments and existing property is expected to be strongest for houses within the inner city,” Mr Oster said.
“Tight credit conditions and rising interest rates continue to be identified as the main impediments to new residential developments and existing property sales.”