Tasmania has joined New South Wales and Queensland as a leading growth state within the property and construction sector as expectations of a strong year continue to abound, the latest survey suggests.
Whilst results of the March Quarter Property Council of Australia Property Industry Confidence Survey indicated that overall sentiment levels regarding expected market conditions over the next twelve months had eased back off a high base, expectations are still extremely high, with participants anticipating strong increases in forward work schedules, construction activity and staffing levels across all states as well as strong gains in capital values across the residential, retirement living, hospitality and retail property segments and modest improvements in debt finance availability and industrial property values.
Whilst Queensland and New South Wales led the way, the biggest mover was Tasmania, which has seen confidence levels jump from a score of 120 on the survey to 137 (any score above 100 indicates net optimism).
Long the weakest market in the nation amid a stagnant population and a sluggish economy, confidence within the state is being boosted by growing indications of a lift in housing sector demand off a low base and confidence in the capacity of the Hodgman government to tackle economic challenges and address the state’s financial position: whereas survey participants frequently expressed disappointment with the previous government, they now rank Tasmania second only to Queensland in terms of government performance in planning and managing growth.
Confidence is especially high in the state’s tourism and hotel sector amid expectations the visit from Chinese President Xi Jing Ping would raise the profile of the state amongst Chinese tourists. Suggestions in the latest media reports that the government will allow for tourism developments in wilderness areas, meanwhile, will no doubt boost confidence further.
In other states, whilst confidence in New South Wales remains the highest in the country amid a massive build-up in home building activity and a strong pipeline of infrastructure investment, Queensland – where an election is scheduled for later this month and expectations are being buoyed by improving conditions in building markets in Brisbane, the Gold Coast and the Sunshine Coast - ranks as the strongest state in terms of confidence regarding debt finance availability, residential and retail capital growth and government performance, and is also seeing increasingly buoyant sentiment in terms of staffing levels and construction activity as well as strong expectations regarding prospects in retirement living.
In terms of sectors, meanwhile, whilst residential and retail continue to rule the roost, expectations are improving in retail sector and accommodation – the former being boosted by a combination of the entry of foreign retailers in prime locations in Sydney and Melbourne, generally improving trading conditions and expectations of especially strong conditions in large format retail (e.g. Bunnings) which should benefit from stronger home markets and the latter benefiting from a recovery in tourism numbers and an growing profile in locations in Tasmania and Queensland following high profile events like Xi Jing Ping’s visit and the G20 summit.
Property Council of Australia Chief Executive Officer Ken Morrison welcomed the latest results and said the importance of the sector to the economy cannot be understated.
“The property sector starts the New Year far more confident than the broader business community, buoyed by robust market sales, further price growth, and a solid pipeline of construction,” Morrison said.
ANZ Chief Economist Warren Hogan also welcomed the results but cautioned that other areas of the economy remained subdued and reiterated that the Reserve Bank was unlikely to lift rates in the future.
“Despite a relatively positive outlook for the property sector, we continue to expect the RBA to remain on hold for an extended period of time,” Hogan said.
“However, we acknowledge the near-term risks are more skewed towards a cut in the first half of 2015, particularly if the unemployment rate increases or the AUD doesn’t sustain its recent depreciation.”