Major decision makers in Australia’s property industry are cautious in expectations regarding the nation’s economy and their levels of construction activity in 2025, the latest report suggests.

The Property Council of Australia has released the December quarter edition of its Property Industry Confidence Survey, which was undertaken in partnership with construction management software firm Procore.

Overall, the survey indicates that industry confidence increased over the December quarter, with the overall confidence index rising by 8 points from 108 in the September quarter to 116 in the December quarter.

This is well above the 100.0 mark which is considered to be neutral.

However, expectations are subdued in respect of construction activity, forward work schedules and employment along with the broader economy and government performance.

In relation to the first three items, the survey shows that expectations for the next twelve months are below long-term averages since the survey began in 2011.

Regarding construction activity specifically, expectations are either at or below average for each sector and are particularly subdued in respect of office and retail construction (see chart).

On the economy, meanwhile, expectations for national GDP growth over the next twelve months remain broadly in negative territory.

State economic expectations are somewhat more buoyant in Queensland, South Australia and Western Australia but are particularly pessimistic in Victoria and are negative in the ACT.

Turning to government performance, the survey found that far more participants believe that the Commonwealth is doing a poor job at delivering policies that encourage economic growth and jobs than believe that the Commonwealth is doing a good job at this.

At a state level, sentiment regarding government performance in planning and managing growth was positive in South Australia and Western Australia but is negative everywhere else.

By far and away, respondents nominated housing affordability as the most critical issue for both Federal and state governments to address.

Victoria down in the dumps – but should this be the case?

A particularly interesting case is Victoria, which was the only state in Australia to record negative confidence overall.

Victoria ranked last in the survey in terms of twelve month expectations for forward work schedules, staffing, debt finance ability and state and national economic performance.

Victoria also recorded the worst result of any of the main states/territories in terms of perceived government performance in terms of planning and managing growth. All up, a net balance of 40 percent of survey respondents in Victoria believe that the state is doing a poor job in this area.

Concerns about the state of Victoria’s economy and financial position have been growing over recent years. Particular concerns surround the state’s net debt, which is forecast at $155.2 billion or 24.2 percent of GDP in 2024/25 and is expected to rise to $187. 3 billion in 2027/28.

This has prompted media headlines about Victoria being in a ‘state of decline’ with finances that are ‘heading towards a cliff’.

In the property sector specifically, meanwhile, there are concerns about taxation policy settings in relation to real estate as well as worries that the state government is not doing enough to address housing affordability challenges.

As pointed out in an article published by The Australia Institute, however, concerns about the state’s finances and economy may be overblown.

In fact, as highlighted by the 2024/25 Budge Update, the state has outperformed national averages over the past 2-3 years in terms of economic growth, employment growth and business investment.

As for the fiscal situation, the state is expecting to return to an operating surplus by 2025/26 whilst its total assets exceed its overall liabilities by a factor of around 2.5 to 1.

More to be Done

Property Council of Australia CEO Mike Zorbas called on governments to address barriers to greater housing supply.

“High barriers to construction, high input costs and low market capacity are all showing up in weak construction expectations,” Zorbas said.

“Utility delays, planning duplications between levels of government and state property taxes continue to drag on housing supply and add to the cost of new homes.

“With the federal election nearing, all parties must recognise that supply is first, second and third in solving the housing crisis. All levels of government must tailor policies to encourage greater investment in apartment, greenfield, purpose-built student accommodation and retirement village construction in addition to social housing to meet our ambitious national target of 1.2 million new homes by 2029.”

The survey was conducted between November 21 and November 27.

It involved 355 respondents including property developers, managers, agents and service providers.

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