Property prices to surge by 20 per cent: NAB

NAB has revised its property market forecast, now expecting dwelling prices to rise by 18.5 per cent this year before slowing to 3.6 per cent in 2022 as affordability constraints become more pronounced.

“The better than expected recovery in the economy and labour market alongside very low interest rates has supported the strong rebound in the property market,” said NAB chief economist Alan Oster.

Among capital cities, Hobart is tipped to see the strongest growth in 2021 at 23.5 per cent, followed by Sydney (21.6 per cent), Brisbane (19.5 per cent), and Melbourne (17.6 per cent).

“Since september 2020, capital city prices have risen by 14 per cent, leaving them 12 per cent higher than their pre-COVID-19 (February 2020) level,” said Olster.

The report revealed that first home buyers in particular are driving much of the current frenzy, making up 47.8 per cent of all new property sales in the second quarter of the year.

It also noted that in the current market foreign buyers remain only “bit players,” accounting for just 2.3 per cent of new property sales and 2 per cent of established property sales.

NAB property price forecast

Unlike other major banks, which have challenged guidance from the Reserve Bank about the timing of a rate hike, NAB believes that official interest rates will remain at their current levels until 2024. 

Olster said the labour market had yet to produce generalised wage pressures, however he remains open to the possibility rates will rise sooner given the recent inflation spike.

Related: House prices are outstripping pre-pandemic expectations

“We accept that there will likely be transitory bouts of both wage growth and inflation in the near-term as a result of border closures, supply chain disruptions and temporary boosts to demand for some products,” he said.

“Should these factors spill over into other industries creating more generalised wage pressure or inflation expectations rise more rapidly it is possible that rates could move slightly earlier.”

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