Property industry confidence down in mining boom states but up in non-resource states: PCA-ANZ

Sentiment in the property industry has dropped in resource states and picked up in the others, according to ANZ’s latest industry confidence survey.

Sentiment fell across the country for the second consecutive quarter from 106 points to 102 for the December quarter, though ACT, Victoria, NSW and Tasmania have improved, according to the latest Property Council of Australia-ANZ property industry confidence survey.

The survey polled more than 3,500 property and construction professionals from all states and territories for their forward-looking views.

The survey found the biggest mining states suffered the biggest declines, with NT, Queensland and WA posting the largest falls in sentiment.

NT dropped from 151 to 130 on the index, Queensland dropped from 113 to 96 and WA dropped from 136 to 120, with SA also declining slightly.

Queensland was the only state to shift from positive to negative sentiment over the quarter.

Despite falling confidence in resource states, the survey found most respondents did not think the mining boom was over.

Some 68% of respondents did not think the mining boom was over, and 27% believed their business’ performance would be reliant on the mining sector.

The survey found expectations for forward work have increased in Victoria and NSW, with respondents there having more faith in their own states than in the national economy.

The outlook for office space and retail sales in NSW and Victoria has also improved.

The survey found sentiment in the residential market has risen from 93 to 101, the first time in the survey’s five quarter history the sentiment has been positive. Sentiment for residential capital values rose in all states and territories, except for NT. It found housing construction expectations have also risen.

Confidence in funding projects has improved according to the survey, though staffing level expectations have fallen from 104 to 102 on the index.

The office market had the strongest investment potential over the next 12 months according to respondents, followed up residential, industrial, retirement living, shopping centres and then leisure/hotel/tourism property.

Property Council chief executive Peter 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,” 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% of respondents believe economic growth will weaken over the next 12 months, up from 9% last quarter.

“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,” Hogan says.

“Nonetheless, the medium term domestic economic outlook remains solid and will continue to be underpinned by strong growth in business investment.”

Hogan says though house prices remain soft in most Australian capital cities, prices have shown tentative signs of reaching a floor following recent RBA rate cuts.

“May and June RBA rate cuts are expected to be further supported by the October rate cut,” Hogan says.

“Residential auction activity has increased and auction clearance rates are at the highest level since 2010.”