Property sentiment at an 18 month high: Property Council of Australia

Sentiment within Australia’s property industry is at an 18 month high, according to research by Property Council of Australia and ANZ.

The gains are driven by increased confidence in the housing market and easing financing conditions, according to Property Council of Australia-ANZ Property Industry Confidence Survey.

Across the country overall sentiment is up from 107 last quarter to 124 on the index. A score of 100 is considered neutral.

NSW, VIC, WA and QLD recorded the largest increases in sentiment.

Western Australia leads at 149, followed by Northern Territory at 132, New South Wales at 131, Queensland at 121, Victoria at 117, South Australia at 108, ACT at 96 and Tasmania at 96.

State by state break down as follows:

Victoria

Victoria rose 18 points on the index – the third consecutive rise, but there are concerns about rising construction costs.

The report found rising Victorian sentiment is primarily being driven by the retirement living, industrial and residential sectors, with 58%, 40% and 39% of Victorian respondents expecting increases in construction activity levels over the next 12 months for these sectors respectively.

Property Council Victorian executive director, Jennifer Cunich, says the survey also found the rising cost of construction was a growing concern for the sector, with 46 per cent of Victorian respondents indicating they believe the cost of construction will rise over the next twelve months.

“Rising construction costs undermine project viability, interstate competitiveness and threaten our ability to attract investment,” Ms Cunich says. Unless Victoria gets its construction costs under control, we will continue to loose vital investment and labour to more competitive markets.

“The Property Council hopes next month’s State Budget tackles this challenge by placing downward pressure on construction costs. Reductions in planning delays, industrial disputation and bureaucratic red tape would make a big difference to the sector’s long term outlook and investment levels.”

ANZ Head of Property Research, Paul Braddick says, “the increase in property industry confidence was likely driven largely by an improved outlook for the residential property market, with solid housing sales and positive house price growth in recent months.”

“In addition, a more stable global economic outlook and expectations of increased availability of debt finance are likely to have boosted expectations for construction activity and property capital growth in Victoria,” Mr Braddick says.

“Nonetheless, we expect property industry confidence to be weaker in the coming quarters, weighed down by a soft outlook for the Victorian economy, further slowing in Victoria’s housing construction from the recent peak and a subdued outlook for retail spending and office employment.”

New South Wales

New South Wales rose 19 points on the index.

“Sentiment across the property industry has hit new heights and now sits well above the national average,” says Property Council NSW executive director, Glenn Byres.

“In fact, NSW enjoyed the biggest lift in sentiment of all jurisdictions across the country.

“Positive expectations for national economic growth, availability of debt finance and house price growth have largely fuelled the positive result.

“There are also strong expectations for an increase in staffing levels and forward work schedules across the industry.”

Paul Braddick says, “tight residential property market demand/supply fundamentals, low mortgage rates and solid housing market sales in recent months have driven property industry expectations for house price growth and housing construction higher.”

“However expectations remained varied across sectors with the strongest expectations for capital growth in aged care and commercial office property, while a subdued outlook for retail spending is expected to drive retail property values lower in the coming year,” Mr Braddick says.

 


Queensland

Queensland jumped 17 points in the index.

“The industry returned to the market with renewed positivity after the new year break,” Queensland executive director of the Property Council of Australia, Kathy Mac Dermott says.

“Responses show that the industry in Queensland expects more positive capital growth in all sectors over the next 12 months.” “House price expectations saw its 3rd consecutive quarter of predicted growth and led the sentiment increase.”

Paul Braddick says, “while property industry confidence remains weighed down by a soft outlook for the coal mining sector and recent job cuts to the state government public service, solid growth in retail sales and house prices in Queensland appear to be partly driving a more optimistic outlook for Queensland’s economy and property sector.”

“The survey results show the net balance of Queensland respondents expect state economic growth to increase and commercial property prices to be higher across all segments in the coming year.”

Western Australia

WA rose 18 points on the index, pushing it well in the lead.

The survey found expectations are at their highest point since the survey’s inception consolidating gains made in the March-quarter survey.

Respondents were positive about expectations for state economic growth, with the index score rising strongly from the March quarter (110) to 132 for the June quarter.

Expectations for house price growth are up across Australia with the strongest survey reading in Western Australia. The WA index climbed from 129 in the March-quarter to finish at 164 for the June-quarter.

Property Council WA executive director, Joe Lenzo, says the standout in the survey numbers was that residential is now the new darling of the property sector in WA.

“After a sustained period of negative and stalled growth the survey numbers anticipate a steady pick-up in residential capital values over the next 12-months.

“We have rebounded from previous quarters when respondents were affected by negative sentiment about the resources sector and what impacts this might have on the housing market in WA.

“The June-quarter results have shown that these jitters have receded with a marked improvement in market confidence.”

Paul Braddick says results were driven largely by the most optimistic outlook for the state economy.

“Despite a softer outlook for WA mining infrastructure spending in the coming year, recent increases in Western Australian housing prices, particularly Perth unit prices, and solid state economic growth have driven high property industry expectations for property prices and construction activity,” Mr Braddick says.

“Respondents revealed a particularly optimistic view for residential property with 80% of respondents expecting residential property prices to be higher in the coming year and 84% expecting residential building activity to be higher over the same period.”

 


South Australia

Sentiment rose eight points in the index.

Property Council of Australia South Australia executive director Nathan Paine cautiously welcoms the results, saying that while the lift in sentiment was supported by an improvement in the availability of finance, concerns remained about overall demand levels in the economy.

“While we welcome the positive headline result, respondents’ views of wider economic fundamentals stayed stubbornly bleak, at both the state and federal level,” Mr Paine says.

Respondents’ expectations about the availability of debt finance presented one of the big surprises, with a ten-point turn-around from four points in the negative to six in the positive. This might reflect the growing awareness of patient capital across the globe looking for a secure home. Another notable turn-around was a jump in expectations for housing price growth, a result broadly reflected across the nation.

“While we welcome these “green shoots” of optimism, it is important to note that confidence is a subjective thing, and it is relative,” Paine says.

“These results clearly show that South Australia has room for improvement.”

Paul Braddick says, “the increase in property industry confidence was likely driven by an improved outlook for the residential property market in the June quarter, with the net balance of survey respondents expecting house prices to be higher in the coming year.”

“In addition, survey respondents reported positive expectations for capital growth and construction activity in aged care property, with 51 per cent of respondents expecting aged care property values to be higher in the coming year and 68 per cent expecting aged care construction activity to increase over the same period.”

Northern Territory

Northern Territory rose one point on the index to 132.

The NT’s score on government performance has dropped by 37 index points which is only second to Tasmania, the worst performing state.

Property Council NT executive director, Raquel Nicholls-Skene, says, “now that the NT political situation has settled down and with the implementation of the planning reforms coming into play we expect to see a more positive outlook on the NT Governments performance over the next 3 months.”

“NT still has strong growth however there needs to be some recognition that not all sectors are as buoyant as the industrial sector at the moment.”

Paul Braddick, says the NT’s positive outlook was underpinned by the economic benefits from major energy project investment to demand for labour, property market returns and household income.

“The property sector is already sharing in the Northern Territory economic boom, with Darwin house prices 9.7% higher in the year to February 2013,” Braddick says.

Australian Capital Territory

ACT rose six points in the index to 96, still below the middle ground of 100.

Property Council ACT executive director, Catherine Carter, says the latest survey shows ACT continues to have the lowest sentiment of any mainland state or territory, though this had improved marginally from the March 2013 quarter.

Paul Braddick says respondents in the ACT maintained a broadly negative view of the property sector reflecting a soft economic outlook for ACT.

“With the combination of an uncertain political outlook leading up to the September federal election and a continued unwinding of the 2011 dwelling construction boom likely to have weighed on ACT property industry confidence, 50% of respondents expect ACT economic growth to be lower in the next year,” Braddick says.

 

Alistair Walsh

Alistair Walsh

Deutsche Welle online reporter

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