Property Australia

Falling sentiment flags risks of a declining housing sector

PROPERTY AUSTRALIA April 16, 2019

A six-year low in property industry confidence underscores the consequences of a deteriorating housing sector, as the ANZ/Property Council Survey posts its fourth consecutive drop in sentiment.

The ANZ Property Council Survey for the June 2019 quarter recorded an eight-point fall to 115 index points – its lowest level since March 2013. A score of 100 index points is considered neutral.

Confidence levels were down in all states, except the ACT. Over the past 12 months, industry sentiment has dropped by 28 index points, with the biggest falls in Victoria (-33), NSW (-32) and Queensland (-26). The ACT had the smallest decline during the period (-7) followed by SA (-11).

“This is a significant further drop in confidence in one of the big engines of the economy, just one week after Treasury flagged the risks of a declining housing sector in the budget papers,” says the Property Council’s chief executive Ken Morrison.

While the downturn in residential markets is driving the confidence slump, other important indicators include growth expectations for construction, capital and the national economy.

National economic growth expectations, for example, fell to their lowest level since the survey began in 2011, down by 16 index points to sit squarely in negative territory (-19). SA recorded the smallest drop, while respondents from NSW were most bearish on the economic growth outlook.

Economic growth was identified as the most critical issue for the federal government (28%), followed by housing affordability (23%), cities and infrastructure (15%) and the newly-included issue of population growth and migration (12%).

“The key message for policy-makers is to keep a sharp focus on the property industry and be prepared to step up with a housing contingency plan if that’s what the economy needs,” Morrison says.

“It is certainly a bad time to be risking changes to policy settings such as negative gearing and capital gains tax which may lead to a further drop in confidence across the industry.”

For the first time in two and a half years, survey respondents forecast a fall in interest rates over the next 12 months.

There was a moderation in concerns around the availability of debt finance over the next 12 months, although most respondents still felt it would continue to be difficult to access finance.

David Plank, ANZ’s head of Australian economics, points to the improvement in availability of finance as a signal that the market may turn.

“Certainly, it suggests we may be the past the worst of the downturn in building approvals,” Plank explains, adding that a note of caution is required.

“Finance is still difficult to get, and sentiment in the residential property space is very negative. This primarily reflects the price outlook, which has fallen further in New South Wales and Victoria.

“Sentiment does tend to lead rather than follow prices, however, certainly over the past few years. We think the continued downturn in price sentiment reflects recent developments rather than indicating a deterioration in the outlook.”

The June 2019 survey captured responses from 1,184 people between 11-26 March.

Visit the Property Council’s Data Room to view select ANZ/Property Council Survey historical data series. Learn more about the ANZ/Property Council Survey and our Supporting Sponsor RCP.

Tags: RESEARCH