Debt finance availability to impact price growth and residential construction: ANZ/Property Council Survey

There's a significant cooling of expectations for residential construction - and price growth - in the upcoming December quarter, according to the ANZ/Property Council Survey.

The ANZ expects housing starts to peak at 215,000 in the year to December and ease back to a still elevated 200,000 by end of 2016.

ANZ senior economist David Cannington said the latest survey taken after Malcolm Turnbull became Prime Minister showed a significant shift in outlook for residential property.

"The property sector expects the growth to disappear over the next 12 months," he told the Australian Financial Review.

The nation’s leading measure of confidence in the property industry - which accounts for 11.5 per cent of GDP - was completed by over 2200 respondents across Australia this quarter.

While nationally confidence remains well in the positive range, it has edged downwards over the four quarters for 2015.

New South Wales still leads the nation in terms of confidence and Victoria is holding steady.

Queensland, the Australian Capital Territory and the Northern Territory all recorded rises in confidence for the quarter.

Tasmania and South Australia fell while Western Australia flatlined.

Property Council of Australia Chief Executive Ken Morrison said the results should be closely read by policymakers.

“The economy has relied on strong housing construction, so any softening would have a broader national impact particularly in terms of jobs and economic activity,” Mr Morrison said.

 “In the December quarter we saw a drop in debt finance availability expectations across the board, which is evidence that our regulatory safeguards are functioning as intended.

“We need to keep a close watch on the many factors impacting activity levels, particularly in residential construction.

“Only recently have we started to chip away at the housing supply deficit that built up over a decade as supply fell well short of demand.

“Housing affordability into the future hinges on maintaining a high level of new residential construction to meet the demands of our growing population.

“The results from this survey make the task of removing the major roadblocks to further growth in the property industry more urgent.”

ANZ co-head of Australian Economics Cherelle Murphy noted respondents in the majority of states including NSW and Victoria (which together contribute more than 50% of Australia’s GDP) are less optimistic than 12 months ago.

"Those in the residential sector recorded a larger decline in confidence in the last 12 months than any of the commercial property sectors.

“As the housing sector softens, support to aggregate employment growth from hiring in construction and a range of services industries benefiting from housing activity is also expected to wane.

“Without above average employment outcomes in the rest of the economy, the unemployment rate could push higher."