Consumers and property professionals' expectations of further falls in house prices are leaving them anxious, with a new survey finding more Australians are opting to renovate rather than sell their homes over the coming year.
An NAB survey of 2,000 Australian consumers found most do not think it is a good time to sell their home or investment property.
On average, consumers expect price falls of 2.1 per cent over the next 12 months.
The worst falls, they anticipate, will be in New South Wales (-3.1 per cent) and Victoria (-2.9 per cent).
"Consumers are far more uncertain about the future — around four in 10 said they simply didn't know if it would be a good time to buy, sell, renovate or take out a mortgage," NAB chief economist Alan Oster said.
"Overwhelmingly, the majority plan to sit tight and do nothing."
Mr Oster, said this view was broadly consistent across states, although a much higher proportion in Western Australia said it was not a good time to sell their home.
"We suspect this is influenced by the fact that some home owners in WA may also be sitting on capital losses," he said.
"This very poor result was not unexpected given what's been happening on house prices," Mr Oster said.
He warned a further tightening in credit conditions and weaker price expectations in the investor market could likely further weigh on prices around the nation.
Property experts are more cynical. NAB's latest Residential Property Survey of more than 300 property professionals in the fourth quarter of 2018 found they are expecting a 2.4 per cent decline in house prices over the coming year.
NAB itself is forecasting a further decline in home prices over the next year or so, dropping another 5.6 per cent in Sydney and 7 per cent in Melbourne in 2019.
|
NAB HOUSE PRICE FORECAST (All figures are percentage changes) |
||||
| 2017 | 2018 | 2019 | 2020 | |
| Sydney | 3.4 | -10 | -5.6 | -0.4 |
| Melbourne | 11.3 | -9.1 | -7 | -2.2 |
| Brisbane | 2.5 | 0.4 | 0 | 0 |
| Adelaide | 3.2 | 1.3 | 1.7 | 1.7 |
| Perth | -1.2 | -4.3 | -0.2 | 0 |
| Hobart | 11.4 | 8.3 | 1.8 | 1.8 |
| Average Capital City | 4.8 | -6.7 | -3.8 | -0.6 |
This means that, with the falls experienced last year, the market will have hit peak-to-trough declines of about 15 per cent in Melbourne and Sydney.
It follows similar warnings over the past two months from other forecasters including Fitch Ratings and Core Logic about further house price falls in 2019.
Australia's major cities all unaffordable: Demographia
However, despite house prices plummeting across some major capital cities and more falls expected over the next 12 months, Australia still has one of the world's least affordable housing markets.
After Hong Kong and Vancouver, Sydney is the world's third most unaffordable market and Melbourne the fourth, according to the latest Demographia International Housing Affordability Survey.
The survey ranked 309 metropolitan housing markets in eight countries — Australia, Canada, Hong Kong, Ireland, New Zealand, Singapore, the United Kingdom and the United States — in the third quarter of 2018.
| TEN LEAST AFFORDABLE HOUSING MARKETS | *Median Multiple |
| Hong Kong | 20.9 |
| Vancouver | 12.6 |
| Sydney | 11.7 |
| Melbourne | 9.7 |
| San Jose | 9.4 |
| Los Angeles | 9.2 |
| Auckland | 9.0 |
| San Francisco | 8.8 |
| Honolulu | 8.6 |
| London | 8.3 |
|
Source: 15th Annual Demographia International Housing Affordability Survey *Median multiple is the average house price divided by average household income |
The report rates housing affordability using the "median multiple" of the average house price divided by average household income.
It said 29 major housing markets were classed as "severely unaffordable".
"All of Australia's five major housing markets are severely unaffordable," the report concluded.
"Despite what has been called the largest Sydney price reduction in 35 years, house prices relative to incomes are more than double the rate of the early 1980s."
In Sydney and Melbourne, median income households need at least three years' more income to pay for the median priced house than they did in 2004, when the first survey was published.
The report suggests that the solution to unaffordable housing does not involve "inventing clever regulatory gimmicks or in designing massive subsidies to be paid by the taxpayer or by a few wealthy households."
"The answer will always consist of increasing the supply of land and floor space and removing any land and floor regulatory straight jacket."
