Sentiment drops further as house prices to decline until 2020: ANZ-Property Council

The ANZ-Property Council Survey for the December quarter shows that sentiment in Australia’s property sector has fallen sharply to the lowest level in two years. 

Sentiment in the residential segment has fallen to the lowest level since 2012.

NAB found the same results in their Quarterly Australian Residential Property Survey, which prompted them to change their forecast to predict further losses.

Much like NAB's survey, ANZ-Property Council Survey found that bearing the brunt of the weaker confidence was New South Wales and Victoria.

They noted the decline was recorded across all states and territories. 

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David Plank, ANZ head of Australian economics, said the downturn in the housing outlook is significant, although not surprising. 

"The survey supports our view that both house prices and residential construction are set for a period of decline," Plank said.

"The expectations of tighter credit availability and higher interest rates, if realised, will weigh on the housing market for some time.

"We think housing prices will nudge lower through to 2020, before stabilising through the remainder of that year," Plank suggested.

He said that they do not anticipate the scale of price declines accelerating, given that the economy and household finances are still generally in good shape.

ANZ expect housing construction to post material declines through 2019 and 2020.

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Ken Morrison, chief executive of Property Council of Australia, said that sentiment is softening in critical areas.

“This report shows that sentiment – while still positive – is softening in critical areas across an industry that is Australia’s biggest employer and supports 1.4 million jobs,” Morrison said.

“This shift in sentiment needs to be on the radar of policy makers because now more than ever we need strong investment, tax and planning regimes to keep the economy strong.” 

The outlook for construction and prices has worsened, and firms expect a double whammy of tighter credit conditions and higher interest rates over the next year. Demand from foreign buyers is still falling.

There was good news for the commercial property segment, where sentiment is much better.

"Although posting a small decline in the December quarter, confidence is still sitting at strong levels," the report read.

"The tourism, industrial and office property sectors report a solid outlook, although the retail sector is still challenged."

The ANZ/Property Council survey is based on responses from more than 900 property industry participants. The survey was conducted between 3-19 September 2018.