Confidence in Australia’s property sector has fallen to its lowest level since the outbreak of COVID, a survey of more than 600 real estate professionals suggests.

The Property Council of Australia and construction management software provider Procore have published the June quarter edition of their Procore/Property Council Industry Sentiment Survey.

According to the survey, the overall confidence index plummeted by 12 points from 104 in March to 92 in June.

This represents the lowest level of confidence since the beginning of the pandemic.

Not surprisingly, confidence levels vary across states and territories.

Across South Australia (120), Queensland (120) and Western Australia (112), sentiment remains buoyant despite the quarterly decline. This reflects strong market conditions in housing and home building across these states.

By contrast, weak market conditions across New South Wales (89), the ACT (85) and particularly Victoria (67) have seen confidence levels plummet in these jurisdictions.

Neither Tasmania nor the Northern Territory are considered in this report.

The latest survey comes as Australia’s property industry has been impacted by the Iran war, the May interest rate increase and the tax changes in the federal budget.

Since the start of the Iran War, the confidence index has fallen by 31 points from 123 in December to 92 in June.

Sagging economic and construction confidence

A notable feature of the latest survey was the decline in sentiment surrounding the economy.

As part of the survey, respondents were asked about their expectations for the economy at both a national level and within their state or territory.

At a national level, respondents across all states and territories expect Australia’s economy to deteriorate over the next year.

In terms of individual states, respondents remain optimistic about economic prospects in Queensland and South Australia but are extremely pessimistic in Victoria (almost -70) as well as New South Wales and the ACT.

On a related note, expectations about the direction of interest rates and debt finance availability have fallen away over the last two quarters. Most likely, this reflects concerns that the Iran war will exacerbate inflationary pressures and force the Reserve Bank to tighten monetary policy further.

As a result, most respondents now expect that interest rates will rise and that debt finance availability will deteriorate over the next twelve months.

Away from the economy in general, expectations surrounding construction activity over the next twelve months have also come off.

Not surprisingly, the largest decline is evident in the residential sector – which is highly sensitive to interest rate movements and the property tax changes.

Construction expectations have also eased for most commercial sectors.

Anger with governments

As confidence has sagged, anger at governments has grown.

As part of the survey, respondents were asked to rate the performance of the Federal Government in delivering policies that encourage jobs and economic growth.

They were also asked to rate the performance of their state or territory government in planning and managing growth.

Across all states and territories, respondents overwhelmingly agreed that the Federal Government is doing a poor job.

Turing to states and territories, respondents gave a positive appraisal of governments in South Australia, Queensland and Western Australia but gave a damning assessment for Victoria and the ACT.

In Victoria, respondents gave their government a score of almost -86.4 (the worst possible score is -100).

Action needed

Property Council Chief Executive Mike Zorbas said the results are concerning.

He encouraged the Federal Government to rethink the latest tax changes.

“This is not good news,” Zorbas said.

“Industry is reporting a clear loss of momentum when we need new commercial, industrial, retail and housing projects for our growing cities more than ever.

“The property sector employs 1.4 million Australians and pays $130 billion in taxes each year. Add higher building and borrowing costs, a tradie deficit and new Federal taxes on project investors and you can bet building new homes will soon become even more expensive.”

Commenced in 2011, the survey provides a quarterly update of sentiment across Australia’s property industry.

All up, 606 responses were received for the latest survey, which was conducted from June 1 until June 17.

Respondents include property developers, mangers and agents and service providers.