Are overseas buyers returning to the Australian property market?
The latest NAB residential real estate survey revealed a surge in demand from overseas buyers for new properties during the first quarter of this year.
According to the bank, foreign buyers accounted for 7.9% of demand for new properties in the first quarter, a significant increase from 4.6% in the fourth quarter of last year.
It was also the third consecutive quarter in which the share of new property demand from foreign buyers increased, reaching the highest levels since mid-2020, but still below the average of NAB survey of 9.3%.
Across all states and territories, NSW has seen the largest increase in demand for new build property from overseas buyers, rising from a 3.9% share in the fourth quarter of 2021 to a four-year high of 10.3% in the first quarter of 2022.
Overseas buyer activity also picked up in Western Australia to reach the highest market share in more than five years (10.3%), but activity in Victoria (7.3%) and Queensland (5.0%) is still well below average.
While acknowledging early signs that overseas buyers could return to the market as borders reopen, NAB noted that a “mixed picture” has emerged.
This was demonstrated by demand for established goods from overseas buyers, which remained broadly unchanged from 2.3% in the fourth quarter of 2021 to 2.5% in the first quarter of 2022, compared to a survey average of 5 .4%.
“In established housing markets, the share of overseas buyers was highest in Victoria where it fell slightly to 2.9% and NSW where it increased slightly to 2.9% – although both states continued to track well below average levels of 6.8% and 5.8% respectively,” said Alan Oster, chief economist at NAB Group.
“Overseas buyers were also somewhat more prevalent in Queensland at 2.1% and WA at 2.0%, but also trailed below average levels of 4.9% and 4.6% respectively.”
The NAB survey also found that first-time home buyers accounted for 40.5% of sales in the new home market during the first quarter, the lowest level in two and a half years.
Housing market sentiment, based on the opinions of real estate professionals on house prices and rents, held steady at 58 points, with rising rents offsetting a slowdown in house prices, above an average of 17 points.
However, confidence for the next 12 months fell for the fourth consecutive quarter and confidence for the next two years fell below average after the third consecutive quarterly decline.
“With interest rates widely expected to start rising this year, real estate professionals have also identified rates as a growing impediment to new housing development across states, and a bigger hurdle for homebuyers. established homes, with interest rates now impacting these buyers more than at any time in the past 10 years,” NAB said.
The bank said its house price outlook was broadly unchanged with a 2.5% rise expected in 2022 and an “orderly correction” of around 10% in 2023.
Falls of 11.4% are expected in Sydney and Melbourne in 2023, with smaller falls in Perth (-8.1%), Brisbane (-5.8%), Adelaide (-5.8%) and Hobart (-4.1%). ).
“Overall, the housing market has turned around a little faster in Sydney and Melbourne than we expected at the start of 2022, but has outperformed in smaller markets,” Mr Oster said.
“We expect growth to slow in Brisbane and Adelaide, before turning negative at the end of 2022, alongside falls in major capitals. This is in line with our outlook that the RBA will begin to steadily raise rates from June this year, bringing the cash rate to 1% by the end of the year and 1.75% by the end of 2023.”