A new NAB survey has revealed a resurgence of foreign buyers into Australia’s new housing market, accounting for 7.9% of the demand for new homes across the country, after nearly doubling over the March quarter.
This marks the third consecutive quarterly increase in the overall share of market sales to foreign buyers, from 4.6% in the fourth quarter last year to the highest level since midway through 2020.
NAB’s quarterly property sector survey said the 7.9% share is still well off the peak in demand from foreign buyers of nearly 17% at the height of the housing boom in 2014, with the average share at 9.3%, Australian Financial Review reported.
The upswell in foreign buyer activity is significant. The past year saw housing lot sales surge, pulling forward demand as a result of government stimulus for first-home buyers through the HomeBuilder program.
The NAB survey also found that although first-home buyers still dominate the new housing market, their share of total sales fell to a two-and-a-half year low of 40.1% in the first quarter.
“Market share of foreign buyers in this market, however, ticked up to a near two-year high of 7.9% nationally and accounted for an above-average four-year high, one in 10 sales in NSW – a development to watch as international borders start to reopen,” the bank said.
While rising costs and disrupted supply chains are already weighing on the supply of new homes, survey respondents said rising rates will become an added barrier to new housing development in all states.
Rising rates will be an even “bigger impediment for established home buyers, with interest rates now impacting those buyers more than at any time over the past 10 years,” the report said.
NAB is predicting a 2.5% hike in house prices nationally this year, with Sydney and Melbourne recording only minimal gains. Prices are expected to drop overall by more than 9% next year, with Sydney and Melbourne potentially absorbing falls of more than 11%.
While that forecast is virtually unchanged since the previous quarterly survey, NAB noted the market had turned “slightly quicker in Sydney and Melbourne than we had expected in early 2022, but outperformed in the smaller capitals,” AFR reported.
NAB is expecting the Reserve Bank to start lifting rates steadily from June, bringing the cash rate to 1% by year’s end and 1.75% by the end of 2023.
NAB said “it is important to note that we see this as an orderly correction in house prices with the economy and labour market continuing to perform strongly and wage growth strengthening,” AFR reported.