Major bank downgrades its forecast for growth
NAB says 'evidence of further slowing' in the capital cities has forced it to predict a decline for the rest of the year.
THE housing market continues to cool with price growth softening and activity likely to slow further, according to a new National Australia Bank report.
The report said there continues to be a notable divergence in price growth across the capital cities with Sydney and Melbourne continuing to register monthly price declines but growth remaining positive across the mid-size capitals.
Growth has also now clearly slowed across Perth, Brisbane and Adelaide.
After declining by just under one per cent in both Sydney and Melbourne in the month, prices are now down by 2.1 per cent and 2.3 per cent over the past three months respectively.
Price growth in Perth remains strongest (up 4.8 per cent in the past three months), followed by Brisbane (up 2.8 per cent) and Adelaide (up 2.8 per cent).
Of the smaller capitals, Darwin’s price growth also remains strong at 1.5 per cent month-on-month and 5.2 per cent over the quarter.
Overall, the eight-capital city dwelling price index declined by 0.1 per cent in May, the first fall since early 2025.
Nonetheless, prices remain 7.8 per cent higher over the year.
Regional prices are 11.8 per cent higher than a year ago with monthly growth continuing to track at a stronger 0.6 per cent month-on-month – but also having seen some slowing over recent months.
“With evidence of further declines in Sydney and Melbourne and likely further slowing in Perth, Brisbane and Adelaide, we have revised down our house price forecasts further, now expecting a decline of two per cent in the Cotality capital city dwelling price index over 2026,” the report said.
“We expect declines of 6-7 per cent in Sydney and Melbourn, and a notable slowing in Perth, Brisbane and Adelaide.
“There is some risk we see a more material correction in the mid-size capitals following the very strong price growth and increased investor activity over recent years.
“With rate cuts likely from mid-2027 we expect prices to see a modest pickup over 2027.”
Advertised rents rose by 0.6 per cent in May, following a similar pace of growth in April but slightly softer than the average monthly pace seen through Q1.
In annual terms, advertised rents growth remains elevated at 5.9 per cent, remaining well above pre-Covid rates.
The cooling in the housing market has likely been driven by a range of factors.
“Price growth has been solid for an extended period and affordability constraints are likely to increasingly bind, alongside the increase in mortgage rates we have seen this year,” the report said.
“In addition to weaker momentum, the likely drag on the housing market due to proposed changes to the taxation of investor-owned residential property may mean that households will remain more cautious in the near term.”
