Property industry confidence shows post-election jump but challenges remain

Property industry confidence has jumped following the federal election outcome in a positive sign for the Australian economy, but the Property Council has warned that a number of economic factors remain challenging for the industry which is Australia’s largest employer.

The latest ANZ/Property Council Survey for the September 2019 quarter shows that industry confidence has picked up by 13 index points, reversing a year of decline. 

Industry confidence improved across all states and territories, except for the ACT.

“This strong sentiment bounce is driven by some welcome post-election policy certainty out of Canberra and will be an encouraging sign for the RBA and national policy makers,” said Ken Morrison, Chief Executive of the Property Council. 

“However, despite this positive news, residential construction activity is set to continue to decline and this will have an impact on jobs and the economy,” Mr Morrison said.

“Following the federal election, we have had a quadrella of positive policy news which translated into a strong sentiment bounce: certainty on negative gearing and capital gains tax changes, an interest rate cut, APRA’s lending standards review and the proposed first home buyers loan deposit scheme.

“These are very welcome steps and have led to a much stronger expectations of national economic growth and the availability of credit.

“However, the property sector is not immune from the challenges facing the rest of the economy and a number of state governments have just embarked on a range of investment-sapping tax increases.  

“State budgets in Queensland, Victoria and South Australia have hit the property industry with arbitrary and poorly designed tax increases which will hurt investment and job creation, and risk undermining the current sentiment turnaround,” Mr Morrison said.

ANZ Head of Australian Economics, David Plank, commented: “Since April we’ve been flagging that there were emerging signs of stability in the residential property market. In particular, we noted the fact that pace of house prices declines was slowing and that the auction clearance rate was beginning to rise. 

“Over the past month lower interest rates, the proposed change to the interest rate floor by the regulator, and the removal of uncertainty around the impact of the possible tax policy changes have boosted sentiment toward housing. This boost is reflected in the rise in the auction clearance rate in Sydney and Melbourne to its highest level in more than a year.

“The results of the latest ANZ/Property Council Survey capture this shift, with most parts of the survey showing material improvement. Of particular note is the marked improvement in credit availability. This measure has proved to be a reliable indicator of shifts in housing activity in the past and if it remains so it suggests better times ahead. Certainly it seems safe to say that the worst of the house price declines are well and truly behind us. This doesn’t mean we are expecting a shift back to dramatic increases in house prices. This is not something we see as desirable given the still stretched levels of affordability in Sydney and Melbourne. Nor do we think it is likely with the more stringent credit policies that are in place.

“Also encouraging for the economic outlook was the lift in sentiment in the commercial property sector. This provides some reassurance that the recent weakness in the domestic economy and the more negative global environment hasn’t flowed through into a sharply weaker outlook for business investment.”

Highlights from the September 2019 quarter: 

* The national confidence index increased by 13 index points for the quarter to 128 points; it’s second-largest quarterly increase since the survey’s inception, reversing a year-long downward trend since June 2018.A score of 100 index points is considered neutral.

* Confidence improved across all markets, except for the ACT which fell by 13 index points. Confidence was strongest in South Australia, followed by WA, Victoria, NSW and Queensland.

* There was an improvement in forward work expectations, although sentiment remains in line with the historical average. South Australia recorded the largest increase, up by 16 index points.

* Staffing level expectations improved slightly, driven by increases in NSW and SA but again in line with the historical average. Staffing level expectations fell by 32 index points in the ACT.

* National economic growth expectations have shown a 23 index point improvement, after dropping to -19 index points in the previous quarter and returning to 4 index points for the September 2019 quarter.

* Respondents from all states and territories expect another cut to interest rates in the next 12 months (the RBA announced a cut during the survey period) and for the first time in four years, respondents believed debt finance access would improve over the next 12 months.

* House capital growth expectations are still in negative territory however sentiment has improved markedly in NSW and Victoria.

* Expectations for office and industrial capital growth improved for the September quarter. Both NSW and Victoria recorded large increases for these sectors.

* Retail capital growth expectations continue to be negative, with South Australia the only market reporting positive sentiment. Sentiment is weakest in NSW.

* Retirement living capital growth expectations increased by 4 index points, continuing the positive outlook for this sector. Similarly, hotel capital growth expectations remained positive in all markets except WA.

* Retail construction expectations have dipped into negative territory for the first time in the survey’s history, while residential construction expectations, while remaining negative, picked up by 10 index points although coming off its record low result in the June 2019 quarter.

* Sentiment towards the Federal Government soared in all states and territories, except the ACT, with national sentiment turning around by 18 index points.

* Sentiment towards state and territory governments was strongest in NSW and South Australia. Queensland recorded another quarter of strongly negative sentiment. (These results will not reflect the impact of new taxes and surcharges announced in state budgets which were handed down at the end of or after the survey period.)

Background:

The ANZ/Property Council Survey commenced in 2011. It is now one of Australia’s largest surveys of sentiment in the property industry – our largest industry and employer which supports 1.4 million jobs.

Respondents are drawn from across the property industry, including property developers, managers and agents and service providers.

The Q3 2019 survey was conducted online between 28 May and 14 June 2019 and included 980 respondents.

Media contact:  Matt Francis | M 0467 777 220|  E mfrancis@propertycouncil.com.au

To view select ANZ/Property Council Survey historical data series, visit the Property Council’s Data Room .

To find out more about the ANZ/Property Council Survey and our Supporting Sponsor RCP, visit: www.propertycouncil.com.au/confidence