Business research

NAB Quarterly Australian Residential Property Survey Q3 2022

National housing market sentiment fell below survey average levels in the third quarter of 2022 as the national housing market downturn accelerated and widened. Solid growth in rental markets, however, continued to provide some support.


NAB continues to see continued adjustment in the housing market as interest rates rise – and still expects to see a peak-to-trough drop of around 20% in house prices.

Survey Highlights

National housing market sentiment fell for the second straight quarter in the third quarter as the national housing market downturn accelerated and spread more broadly. Overall, the NAB Residential Property Index fell to +9 pts (+29 pts in Q2) and drifted below the survey average (+17) for the first time in 2 years. The index is now mainly supported by a solid rental market.

Sentiment fell in all states in Q3 except WA (+58 pts), but remained highest in NT (+75 pts). It fell the most and turned negative in ACT (-75 pts) and TAS (-25), with NSW (-5 pts) and VIC (-2 pts) negative for the first time since Q2 20. Sentiment also fell sharply in SA (+40) and QLD (+10), but the two states were (along with WA) the only areas to report a positive result.

Short-term confidence levels sank further in Q3, with the 12-month measure now sitting at a 2-year low +10pts. The 2-year measurement has however increased slightly to +25 pts, but remains well below the average (+45 pts). WA (+60 pts) is the most confident state in the short term – and the only state to report an improvement in confidence.

The survey’s average forecast for national house prices in the third quarter has been cut to -2.6% in 12 months (previously -1.2%) and -1.4% in 2 years (previously -1). .3%). Expectations for the next 12 months have been reduced in all states except WA – now forecast at 2.2% (1.4% in Q2). Property professionals have prices falling at VIC (-4.5%), ACT (-4.0%) and NSW (-3.7%).

The outlook for rents has improved in Q3, and is now expected to rise 3.5% over the next 12 months and 3.8% in 2 years nationally. With rents rising faster than house prices, gross yields are expected to improve, with rents outpacing prices in every state.

With supply chain issues, high commodity prices and ongoing labor shortages, construction costs are still seen as the biggest constraint to building new homes nationwide. Rising interest rates also overtook the credit crunch as the second biggest constraint. As rising rates continue, real estate professionals have again pointed to rising interest rates as the most significant (and growing) constraint for buyers of existing properties.

Real estate professionals believe that the 3 most important considerations for homebuyers when deciding to buy a property are how much they are willing to borrow to buy (82%), good local amenities ( 60%) and the size of the house (57%). A new study also finds that the rising cost of renovations has a “fairly significant” influence encouraging people to buy fully renovated properties (7.5 pts out of 10), as the use of digital tools has become more important in the sale of properties also “fairly significant” (7.1 pts out of 10).

NAB’s point of view

The housing market has adjusted to a higher level of interest rates and will continue to do so in the near term as the RBA raises rates further and the impact of previous rate hikes continues to be felt. Our outlook for house prices is broadly unchanged, with house prices expected to decline by around 20% in capital cities from the mid-2022 peak. Declines are expected to be widespread, but led by areas where accessibility constraints are most binding. Sydney and Melbourne have led the declines so far, but prices in other capitals now also appear to have peaked – and the decline in Brisbane has accelerated.

More generally, the economy and the labor market continue to show resilience, but are expected to lose momentum as higher rates and high inflation affect household budgets. We expect the RBA to raise rates further in the coming months, taking the cash rate to 3.1% before pausing to assess the impact of rate increases to date. While the influence of global factors on inflation is expected to diminish, domestic factors will become increasingly important, including faster wage growth.