The sentiment gap between the resource states and the rest is closing, with new research showing property industry confidence dropping in the resource-rich states but recovering elsewhere.
The latest Property Council of Australia-ANZ Property Industry Confidence Survey shows sentiment for the December 2012 quarter moved down on the index, from 106 the previous quarter to 102.
However, analysis of the results shows improving sentiment in the non-resources states (ACT, Victoria, NSW, Tasmania) was dragged down by weaker sentiment in the resource-rich jurisdictions (Queensland, WA, NT, SA).
The survey polled more than 3500 professionals from the property and construction sector in all states and territories for their forward-looking views.
“The Property Industry Confidence Survey clearly shows a sharp drop in sentiment in resource states, but most respondents did not think the mining boom was over,” says Property Council Chief Executive Peter Verwer.
“When asked whether the mining boom was over, 68 percent of property professionals said ‘no’ and only 27 percent believed their business’ performance would be reliant on the mining sector.”
Key findings for the Property Council-ANZ Property Industry Confidence Survey are:
Overall sentiment continues to trend downwards: overall sentiment on the index has moved down from 106 in the previous quarter to 102 (an index score of 100 is considered neutral). It is the second consecutive quarter of declining sentiment
The biggest mining states suffered the biggest declines: NT, Queensland and WA posted the largest falls in sentiment. NT dropped from 151 to 130 on the index, Queensland dropped from 113 to 96 (the only state to shift from positive to negative sentiment over the period) and WA dropped from 136 to 120, with SA also declining
Australia’s biggest states on the rise: expectations for forward work have increased in Victoria and NSW. Respondents there have more faith in their own states than in the national economy. The outlook for office space and retail sales in NSW and Victoria has improved
Sentiment in the residential market is rebounding: sentiment for residential capital values shifted from negative to positive over the period, from 93 on the index to 101: the first time in the history of the survey it has been positive. Sentiment for residential capital values rose in all states and territories, except for NT. Housing construction expectations also rose
Confidence in funding projects has improved, but staffing level expectations have fallen again: sentiment about the availability of debt funding improved but is still negative, moving from 93 on the index to 98. However, the outlook for forward staffing levels has fallen again and is now close to neutral. Sentiment for this measure declined from 104 to 102 on the index
Office on top for anticipated capital growth expectations: property professionals believe the office market has the strongest investment potential over the next 12 months, although the gap between this and other asset classes is narrowing. Respondents ranked residential as the asset class with the next highest potential for capital growth, followed by industrial, retirement living, shopping centres and hotels / tourism / leisure
Mr Verwer says Australia’s largest property markets – NSW and Victoria – showed some encouraging signs. “Respondents in these states have more faith in their local economy than the national economy, and expectations for forward work have improved,” Mr Verwer says.
“Furthermore, although sentiment for debt funding availability is still negative, the shift in outlook here bodes well for future development.”
ANZ Chief Economist, Warren Hogan, says the Survey shows a net balance of 13 percent of respondents believe economic growth will weaken over the next 12 months, an increase from the previous quarter where the net balance was 9 percent.
“We expect economic activity will remain relatively soft in the short term as Australia transitions to slower real income growth, with the terms of trade returning to pre-crisis levels,” Mr Hogan says.
“Nonetheless, the medium term domestic economic outlook remains solid and will continue to be underpinned by strong growth in business investment.”
Mr Hogan says while house prices remain soft in most Australian capital cities, prices have shown tentative signs of reaching a floor following the May and June RBA rate cuts.
“May and June RBA rate cuts are expected to be further supported by the October rate cut,” Mr Hogan says.
“Residential auction activity has increased and auction clearance rates are at the highest level since 2010.”
Peter Verwer, CEO, Property Council of Australia
Ph: 0407 463 842
Warren Hogan, Chief Economist, ANZ
Ph: 0414 498 675