National property industry confidence levels have increased on the back of strong house price expectations, according to the ANZ/Property Council Survey for the March 2020 quarter.
The survey posted a five-point increase, up to 123, where a score of 100 is considered neutral. This is slightly above 2019 average of 121 index points, but three index points below the survey historical average.
The ANZ/Property Council has proven an accurate indicator of housing prices since its inception in 2011.
Source: ANZ/Property Council, Australian Bureau of Statistics.
“Housing construction is one of the big engines of the Australian economy, so it’s encouraging news that industry sentiment has strengthened,” says Property Council chief executive Ken Morrison.
The survey also heralds a renewed housing affordability challenge for policy-makers, Morrison warns.
“Strong house prices help underpin confidence and activity, but without matching housing supply, this can lead to runaway price increases and real housing affordability pressure.
“Coming off the back of a sustained drop in new housing approvals and construction starts, we must be vigilant to ensure housing supply keeps up with demand, including population growth, as the residential market reboots.”
Felicity Emmett, senior economist with ANZ, says the improvement in the residential property market seems set to continue.
“The continued improvement in credit availability suggests that the outlook for construction activity, not just prices, should begin to pick up in coming months – initially though a stabilisation and then up-tick in building approvals,” Emmett says.
“A pleasing aspect of the latest survey is the lift in sentiment toward commercial property. Recent weakness, albeit at a generally high level, had us concerned about a possible loss of momentum in the non-residential sector. The recovery in sentiment in this survey suggests the recent weakness in non-residential building approvals might be short-lived.”
Confidence in New South Wales’ property industry has increased eight index points from 116 to 124 over the quarter. Property Council NSW executive director Jane Fitzgerald notes an improved outlook for the residential market. “Though we are seeing more positive signs, we must not forget that overall housing approvals and construction forecasts remain slow across the state, and this continues to have an impact on housing supply and affordability,” Fitzgerald warns.
Residential capital growth expectations have increased by 25 index points in Victoria. The anticipated uplift in house prices poses a challenge for housing affordability, says the Property Council’s Victorian executive director Cressida Wall. She urges the government to “take the survey results as a call to action” by “accelerating the land release process and supporting the delivery of denser housing projects”.
Confidence in the Queensland property industry remains flat, marginally improving by three index points from the last quarter. Property Council Queensland executive director Chris Mountford says the results show industry remains uneasy about economic conditions and “set a tone for this year’s elections”. Property taxes and charges are the top priority for respondents. Housing supply, affordability and planning regulation also rated highly.
The survey revealed a slight overall improvement in Western Australian property industry confidence to 124 points, up from 122 points in the December quarter. But WA had the lowest house capital growth expectations over the next 12 months at just six index points, up by three points on the last quarter. Property Council WA executive director Sandra Brewer says the results “indicate that our members feel there’s more work to be done on property taxes and charges”.
Confidence in South Australia’s property sector is rebuilding in the wake of uncertainty surrounding the state government’s land tax changes. Statewide confidence increased by 16 points to 117 – the equal highest quarterly increase on record. “Unfortunately, this record-breaking quarterly uplift follows last quarter’s 43-point deterioration in the midst of the land tax uncertainty,” says Property Council SA executive director Daniel Gannon.
Sentiment has taken a dip in the ACT, although the key measures which drive the industry’s economic contribution hold up. The overall confidence index fell from 144 index points in the previous quarter to 127 index points for the March 2020 quarter. According to Property Council ACT executive director Adina Cirson, the survey was conducted while the ACT Government pushed through new building industry regulations despite industry’s significant concerns about their effectiveness and impact.