Residential construction and price rebound forecast: ANZ-Property Council survey

Property sentiment in Australia edged lower in the latest ANZ-Property Council Survey, but remains elevated, highlighting the resilience of the sector and the economy more broadly. While the decrease in sentiment was broadly based across sectors, the declines were surprisingly modest given that more than half the country was in lockdown during the survey period. The survey was taken between 30 August and the 15 September, while NSW and Victoria were in lockdown. While lockdowns have impacted confidence, particularly in the hotel/tourism and office sectors, the overall outlook remains surprisingly positive in the face of the extended lockdowns in NSW and Victoria, it showed. "With vaccination rates approaching 80% across the country, sentiment is being underpinned by expectations of a solid economic rebound on top of a large pipeline of residential construction and strong house prices." The impact of the pandemic has been uneven, it noted. "In the residential sector, the outlooks for both construction and prices are benefitting from targeted stimulus like the HomeBuilder program and record low mortgage rates. "Residential sentiment remains well above the long-run average and pre-pandemic levels of sentiment. "Importantly, businesses report being very confident about their own outlook – with employment expectations barely nudging and the forward work schedule rising." "In the industrial sector, where sentiment is very high, the pandemic has accelerated the shift to online sales, strengthening demand for warehousing and logistics property. "Conversely, the impact of COVID-19 is weighing on the office and tourism sectors. "The hotel property outlook is unclear, given uncertainty around the timing of international border reopening, while the latest round of lockdowns has stalled the recovery in sentiment in office property, hitting occupancy and highlighting concerns about the extent and permanence of work-from-home arrangements." The residential construction outlook edged marginally lower, while remaining very positive, it noted. "The HomeBuilder program has ended, and approvals are turning over, but there is an enormous amount of work in the pipeline and an uptick in investor housing finance suggests an improving outlook for the apartment market." Nationally, a net balance of 51% of firms in the residential sector expect an expansion in activity, down from 52% in the June survey. The outlook varies across states, with expectations rising in NSW, Queensland and Western Australia, and declining in Victoria and South Australia.