In contrast to the turmoil of international markets, the Property Council’s inaugural Property Industry Confidence Survey shows the Northern Territory rivals boom-state Western Australia with its optimistic industry outlook.
Property Council of Australia (NT Division) Executive Director Nick Bradley says the survey revealed predominantly optimistic trends within most sectors of the NT Property Industry, with even greater potential for investment pent up in anticipation of the INPEX project.
This was reflected in stand-out optimism in the industrial sector. Respondents’ views on other asset classes appeared to be more restrained, possibly indicating an expectation of greater opportunities in coming quarters.
“Expectations beyond the second and third quarters are very positive indeed, particularly for the industrial, residential and retirement living asset classes, which show the greatest potential for strong investment returns within the next 12 months,” says Mr Bradley.
According to ANZ’s Chief Economist Warren Hogan, optimism revealed by the survey is justified, with investments in major projects continuing to be rolled out in 2012.
“Respondents in the Northern Territory were very positive with an index reading of 119.8 (second only to Western Australia),” says Warren Hogan, ANZ’s Chief Economist.
“While economic conditions have slowed following the completion of several major investment projects, the outlook is bright with a number of large resource projects expected to commence in 2012.
“These projects should underpin a solid rebound in economic activity, employment and property demand.”
The Survey was completed in the September quarter of 2011 by investors and developers in all sectors of the property industry across Australia. The survey canvassed expectations for a range of business outcomes in the property industry, including staffing levels, investment yields, property values, construction activity, future work orders, and general economic conditions.
The Northern Territory ranked highly in a confidence index (see the chart on page 3) that compared confidence between the states and territories, with a confidence index of 120, coming second only to WA, which topped the index with 122.
Both of these states contrasted starkly with the other states and territories, where confidence index readings of around 100 signified neutral settings, in which investor sentiment is dampened by stalled or weakening property sectors.
“The survey reveals that capital value for commercial office, industrial, shopping centre and retirement living are expected to hold their ground in the short term, but interestingly, respondents were less certain about the short term value of the NT residential market, where it seems a dip is expected in the next quarter followed by a rally before the end of 2011,” says Mr Bradley.
“Notably, 45.5% of contributors identified a positive Financial Investment Decision from INPEX in respect of the Icthys LNG project among the top three issues that will influence their business decision making in the coming quarter, which rated higher even than the influence of interest rates.
“This clear view that INPEX’s proposed $30 Billion project will be an important driver in the NT property sector is endorsed by 40.6% of those surveyed indicating that the construction cycle for the industrial asset class is already rising, where other classes are thought by the pool majority to have stalled.
CBD Office demand, rents and yields are expected to stay the same for the coming quarter. This is also true for people’s view of the availability of debt finance, interest rates and inflation, though 34.4% of those surveyed expect that the availability of debt finance will soon become the single biggest barrier to property investment in the Northern Territory.
40.6% of the survey pool do not support the introduction of a Carbon Pricing Scheme and of the remaining participants, 28.1% are undecided on the issue. These statistics are fairly reflected in people’s view of construction costs in the NT over the next twelve months, where 37.5% expect costs to increase by as much as 5%, and 34.4% believe that construction costs will increase by between 5% and 15%.
“In terms of a fundamental gauge of Property Industry Confidence, however, there are two standout responses from survey participants that highlight the optimistic mood within the NT Property Sectors:
In relation to staffing levels over the next 12 months, 48.5% of the survey pool expect no change to current staffing levels but the same large proportion of the pool (48.5%) are anticipating either an increase or a significant increase to current staffing levels.
In relation to the Forward Work Schedule, 54.7% expect that they will ‘hold the line’ and maintain current levels, but 43.7% anticipate either an increase or a dramatic increase to their forward work schedules.
“This vital feedback from industry representatives will assist the Property Council in framing its advocacy agenda in the Northern Territory.
“The results of the first Property Industry Confidence Survey clearly show that while growth in most sectors has plateaued in recent times, the industry has high hopes for Darwin as a hub for offshore energy projects; but while there is an expectation that economic conditions in the NT will improve markedly within the coming twelve months, some sectors will struggle for another quarter or two before they see gains improving.
“However, while we have good cause to be optimistic, the Territory’s reliance on the Energy sector to drive future economic growth will require careful attention to the prudent regulation of government policy in order to avoid the two speed economy phenomenon that could easily undermine the stronger sectors of the NT property industry”, Nick Bradley says.
Nick Bradley, NT Executive Director, (08) 8943 0666 or 0408 946 406
Warren Hogan, ANZ Chief Economist, 0414 498 675