What key property trends should brokers keep an eye on?

Senior economists give property snapshot amid an "uncertain" economy

What key property trends should brokers keep an eye on?


By Ryan Johnson

Brokers are being urged to “keep an eye on” the latest property trends, with senior NAB and CoreLogic economists releasing a six-month property snapshot as well as insights for what’s ahead for the Australian market.

Customers are facing a lot of uncertainty right now, but the property market is still active and competitive, according to Adam Brown (pictured above left), NAB’s executive of broker distribution.

“Many customers are looking for guidance on what they can afford, where to buy, and what their home lending options are – and brokers are in a prime position to help,” Brown said.

Released earlier this week, NAB Broker’s “First Half Property Update 2023: Keeping Brokers Informed” is a combination of insights from NAB’s senior economists and analysis from CoreLogic.

Brown said the report gives brokers access to the latest property and economic data to help them support their customers in making informed decisions.

“The more information brokers have about property markets and the economy, the better they will be able to help their customers to achieve great outcomes,” Brown said.

The macro snapshot

The macroeconomic environment has been in some unfamiliar territory for a while now.

As NAB group chief economist Alan Oster pointed out in the report, there are signs that Australia’s economy is “sharply” slowing, although a “severe downturn remains unlikely”.

Yet the property market remains buoyant, with NAB’s group economics team raising its forecast for housing prices last week to a 4.5% increase over 2023.

Tim Lawless (pictured above right), head of research at CoreLogic Asia Pacific, said that usually economists look for “a typical catalyst” that kicks off a new growth cycle, such as a drop in interest rates, credit becoming more available or some type of fiscal stimulus such as an incentive for first home buyers.

“The current upswing has occurred in the absence of these factors,” Lawless said.

But there are other factors at play contributing to this newfound upwards pressure on home values. 

The most significant factor, said Lawless, is on the supply side, with a “very low number” of homes currently being advertised for sale. 

Across the capital cities, advertised stock levels are 18.9% lower than a year ago and 24.3% below the previous five-year average, according to CoreLogic data.

NAB’s statistics echoed this fact, with investment in new dwellings being 6.2% down from its peak in mid-2021.

“Our Group Economics team is expecting dwelling investment to fall through 2023 and 2024 – so we don’t expect any substantial increase in the supply of housing,” Brown said.

Demand for housing has also ramped up from net overseas migration moving to new record highs and forecast to remain above average over the next few years. 

“While overseas migration tends to flow more directly into rental demand, with rental vacancies so low, it’s reasonable to assume there is some spillover occurring from rental markets into purchasing demand,” said Lawless.

Still, as Brown said, “uncertainty is high”.

Inflation and interest rates

With this uncertainty swirling around the economy, this week’s inflation data was welcome news to many.

NAB Group Economics forecasted headline inflation to be 0.9% quarter-on-quarter for Q2, so the latest quarterly measure (0.8%) was slightly below expectations.

Because of the latest CPI figures, Lawless said “it’s likely” that more forecasters will call a peak in interest rates.

“Labour markets remain extremely tight with unemployment around generational lows. Although labour markets are set to loosen, it’s likely the large majority of borrowers will keep up to date with their mortgage repayments as long as they are gainfully employed,” Lawless said.

NAB however, has predicted the rate is yet to peak, still sticking to its forecast of 4.6%.

“We are constantly reviewing our forecasts for the cash rate. Our economics team’s forecasts a pause to the cash rate in Tuesday’s RBA meeting,” Brown said.

Investments and mortgage cliffs

Another trend to keep an eye on, according to Lawless, is the large number of borrowers moving from very low fixed mortgage rates to a substantially higher variable mortgage rate - in most cases from around 2% to around 6% or higher. 

This comes at a time where nearly half (43%) of all Australians have experienced some form of financial stress or hardship in the June quarter, up from 42% in Q1 and 35% a year ago, and well above average (36%), amid higher inflation and rising interest rates, according to NAB’s latest insights.

“The peak in this ‘mortgage cliff’ is being navigated as we speak, so over the coming months we should get some clarity as to whether borrowers are managing the transition or not,” Lawless said.

Another key point for brokers to consider is the impact on investors.

Lawless said when interest rates peak, sentiment could start to lift and investors could become more active, positioning for medium to long term capital gains.

However, with many states implementing new policies in this area, the impact on investors and their financial advisors may be uncertain.

“Many states are debating or implementing rental and taxation reforms which are likely to impact investors and investment sentiment,” Lawless said.

Supporting brokers

Reinforcing NAB’s commitment to supporting brokers and their customers, Brown said the “First Half Property Update 2023” report was designed for brokers to “navigate the opportunities and challenges in today’s market and ahead”.

“Every day, brokers are there for their customers, helping Australians from first home buyers to

investors to empty nesters, to get the best outcomes for their home lending needs,” Brown said.

“We remain firmly focused on our goal to be the most reliable bank for brokers and we continue [to] invest to bring clarity, transparency, and simplicity to home lending.” 

To view the report, click here.

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