On the other hand, the share of foreign buyers in the Australian housing markets continued to fall. Their share dropped to a six-year low at 8.4% in new property markets and a five-year low at 5.5% in the established market.
“Clearly, the efforts of policymakers both domestic and offshore to stem the tide of foreign capital entering Australian property markets are bearing fruit,” said NAB chief economist Alan Oster.
The NAB Residential Property Index remained at above-average levels, with sentiment towards the residential property market still positive in most states.
NAB has changed its forecast for 2018 amid revisions to Sydney prices, where recent price trends have been most concerning and regulatory measures are likely to have the biggest impact, said the bank.
Its economists now forecast house prices to increase by only 0.7% in 2018 — significantly down from 3.4% previously, with growth remaining subdued at 0.8% in 2019.
They expect the apartment market to underperform, reflecting large additions to the supply and a soft outlook for foreign demand.
“By capital city, house price growth is forecast to be solid in Melbourne and Hobart, followed by Brisbane and Adelaide. Perth is expected to stabilise, marking the beginning of a gradual turnaround for the market, while we expect to see a fall in Sydney prices for the first time since 2011,” said Oster.
The bank expects prices in most cities to remain muted, if not ease further, in 2019.
It forecasts unit prices to fall in Brisbane and Sydney over 2018, with Melbourne expected to be in a similar situation in 2019 due to oversupply.