House prices to fall 1.4% in next year: Survey

The housing mood among those directly exposed to the residential property market has shifted dramatically in the space of three months.

Real estate agents, property managers, property owners and real estate asset and fund managers expect house prices to decline until June 2013, according to NAB’s Australian Residential Property Survey for the June quarter of 2011.

House prices are expected to fall by 1.4% over the next year. This is in sharp contrast to the March 2011 survey, where nationwide prices were tipped to increase by 0.6% over the next year.

Expectations among property sector participants diverge strongly from those of consumers.

According to the latest Westpac/Melbourne Institute Consumer Confidence Index for July, housing confidence had increased to an 18-month high, with the majority of consumers surveyed still expecting house prices to rise this year.

However, the NAB Residential Property Index, constructed based on house price and rental expectations, is now in negative territory with a reading of -5 points compared with +16 points in March.

This reflects falling house prices and a moderation in rental growth.

The biggest turnaround occurred in Victoria, where the index declined from +23 points to -16 points. NSW is currently the strongest housing market state, with the index at +18 points in June – but down from +39 points in March.

Western Australia is the only state not forecast to experience negative growth over the next 12 months. The biggest declines are expected in Queensland (-2.3%) and Victoria (-2.1%), where expectations have fallen sharply over the last three months.

In the March quarter, house prices were forecast to increase by 0.5% in Victoria and Tasmania and by 0.1% in Queensland (0.1%) over the 12 months to March 2012.

WA house prices are forecast to grow by 0.2% over the next 12 months, down from a forecast of 1.1% three months ago.

Overall, the pace of national house price decline accelerated in the June quarter, with prices down by 2%, according to survey respondents.

Prices are not set to recover until June 2013, when they are forecast to have grown by a modest 0.5%.

WA will again significantly outperform the other states, with prices tipped to rise by 3% by this date, with Victoria flat and Queensland falling 0.3%.

This article first appeared on Property Observer, Australia’s best site for property investment news and advice.