The Australian housing market is gathering momentum, with an uptick in activity in recent months also being reflected in NAB’s Residential Property Index which moved back into positive territory for the first time since mid-2018.
Overall, the Index rose 26 points in the September quarter to an above average +18.
Housing market sentiment among property professionals improved and was positive in all states except WA.
According to NAB Chief Economist Alan Oster: “The results suggest the Australian housing market is on the way to recovery.”
Property professionals in all states except WA expect to see positive gains in the next year, with Victoria and NSW leading the way.
NAB's view of house prices
NAB have revised up their expectations for residential property prices.Prices have risen relatively sharply over the past 3 months after bottoming in April - led by gains in Sydney and Melbourne.
Overall, they now expect the CoreLogic 8-Capital City house price index to be down around -0.6% in 2019, but to return to positive reads in Melbourne and Sydney.
NAB expects prices to continue to rise at a moderate pace in 2020, lifting by 4.5% over the year.
This change in view comes after a significant adjustment in prices on the east coast since mid-2017, with 14.9% and 11.1% peak to trough declines in Melbourne and Sydney, respectively.
Despite these declines being relatively large, the adjustment appears to have occurred in an orderly manner following earlier prudential tightening and waning of domestic and foreign investor demand.
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These adjustments also followed a period of exceptional growth, with Sydney prices having increased by over 70% in the 5 years prior to the downturn, while Melbourne prices were up over 50%.
Elsewhere price outcomes have been more mixed.
Price growth in Hobart has slowed recently, after a period of relatively strong performance, while Perth at the other end of the scale has seen a re0acceleration of declines and are now over 20% lower than their post-mining boom peak in 2014. 
In other key survey findings, the outlook for house prices has caught up with rents for the first time since the September quarter of 2017, suggesting the period of yield improvement is coming to an end.
In an environment of stabilising house prices, falling interest rates and an easing in macro-prudential safeguards, the survey pointed to an increasing (albeit still below average) number of investors in both new and established housing markets.
“That said, tight credit was again called out as the single biggest constraint on new housing development, and access to credit the biggest impediment for buyers of existing property across the country” cautioned Mr Oster.
Despite the stabilisation in prices, NAB expects the activity side of the market to remain weak.
Dwelling investment is expected to decline relatively sharply over the next few quarters – though from a high base.
While the pipeline of work to be done remains high, it is likely this will be quickly eroded with high rates of work done.
Building approvals have continued to trend down, suggesting little replenishment to the flow of new work.
