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Property industry sentiment has reversed and is down across the board, even in the nation’s resource-driven states, according to new research released today.
The Property Council of Australia-ANZ Property Industry Confidence Survey shows sentiment moved from 113 to 106 for the September quarter.
The survey polled more than 3100 professionals from the property and construction sector in all states and territories for their forward-looking views.
Key findings for the Property Council-ANZ Property Industry Confidence Survey are:
Sentiment has turned downwards: the survey confidence index dropped from 113 for the June quarter to 106 for the September quarter.
The shine has come off the resource states: while still far more confident than those in other states, respondents in the NT, WA and Queensland all showed a decline in overall confidence. On the index, NT moved from 159 to 151, WA moved from 144 to 136 and Queensland moved from 127 to 113.
Red flags for the biggest states: expectations for state economic growth are the lowest for NSW since the series began. Although expectations in Victoria lifted, the state still has the second-lowest mainland state record.
The biggest losers: the ACT recorded the biggest shift in sentiment, dropping by 16 points on the index. At 85 on the index the ACT also has the lowest confidence of any state or territory (100 is considered neutral). Tasmania has the second-lowest score, at 86 on the index, but it increased by 13 points over the quarter. SA and ACT were the only states or territories to shift from positive to negative over the period.
Less confidence in obtaining funding: respondents are more pessimistic about the chances of obtaining funding. Expectations for debt finance availability shifted from 95 to 93 on the index, reversing the positive gain of the previous quarter.
Poor outlook for residential property: sentiment for house price growth expectations has turned sharply down after trending upward for three quarters. House price growth sentiment shifted from 98 to 93 on the index. Tasmania was the only state to record a lift in sentiment. Queensland and the ACT were the only states to shift from positive to negative sentiment for residential property over the period.
No asset class left unscathed: every property asset class has recorded a downward trend in sentiment for price growth, a sharp turn-around from the previous quarter in which sentiment for price growth expectation was positive for all asset classes except for shopping centres. The biggest loser in the September quarter was the office sector, which dropped from 111 to 104 on the index. However, this sector retains the second-highest score of any asset class.
Property Council Chief Executive, Peter Verwer, says: “There has been a sudden, downward shift in sentiment in the sector following three consecutive periods of increasing sentiment nationally. It is the first time in the series that sentiment has turned downwards.”
“Expectations for staffing levels and forward work are the cause for most concern. Staffing level expectations have been in decline for four quarters but now appear to be accelerating downward.”
“Forward work expectations had been trending upwards for three quarters but have now reversed. While the correction has not been as severe as other measures tracked in the Survey, it is proof that forward work expectations have finally aligned with other indicators.”
“The property industry’s expectations for the national economy have also worsened. Although there was a brief lift in sentiment in the June quarter, the turn-around has been swift and hard.”
“The Survey also shows there has been a big shift in expectations for interest rates - respondents are more confident of an interest rate cut than at any other point in the series.”
“Overall, property industry confidence had been coming off the floor, but it appears obvious it will not improve further until the next interest rate cut occurs.”
However, the long-term outlook is more positive. ANZ Chief Economist, Warren Hogan, says market fundamentals suggest the broader commercial property sector may be at the early stages of a multi-year cyclical upswing.
“Low vacancy and elevated incentives present considerable upside to effective rents/room rates, particularly in the office, industrial and hotel sectors,” Mr Hogan says.
“Moreover, current yields belie the positive fundamentals and will firm as investor sentiment rebounds.”
“A robust economic backdrop will underpin tenant demand, while supply will be constrained by rising development costs and tight credit conditions.”
ANZ maintains a robust outlook for the Australian economy, led by a boom in business investment.
“Capital expenditure expectations and our assessment of proposed major resource and infrastructure projects suggest we are at the early stages of a multi-year investment boom that will underpin solid growth in economic activity and employment,” Mr Hogan says.
“Nonetheless, the fruits of the boom will be spread unevenly across states and sectors, with Western Australia, Queensland and the Northern Territory the major beneficiaries.”
Peter Verwer, CEO, Property Council of Australia
Ph: 0407 463 842
Warren Hogan, Chief Economist, ANZ
Ph: 0414 498 675