Confidence in Australia’s property industry has received a bounce following the federal election result and the removal of uncertainty associated with planned Opposition changes to negative gearing and capital gains tax, a survey involving 980 respondents including property developers, property managers, real-estate agents and service providers has found.
In the September quarter edition of the ANZ/Property Council survey, the National Confidence Index jumped by 13 points from a low point of 115 in the June quarter to 128 in the September quarter.
Confidence levels are now at their highest point since the September quarter last year and are well above the 100.0 mark which separates net optimism from net pessimism.
Expectations rose across all states and territories except for the ACT (results for the Northern Territory and Tasmania were not included).
A strong recovery was also shown in expectations for forward work schedules, national and state economic growth, debt finance availability and office and industrial sector capital growth.
Respondents’ assessment of federal government performance in delivering policies which encourage economic growth and jobs also improved markedly – a sign that the industry welcomes the federal election result.
Having been in negative territory for the past three quarters, the federal government performance index surged to a reading of almost positive 20.
Property Council of Australia Chief Executive Officer Ken Morrison welcomed the latest results, which he said reflected a ‘quadrella’ of encouraging policy developments.
These include the removal of uncertainty associated with Labor’s planned negative gearing and capital gains changes, lower interest rates, a review of APRA lending standards which is likely to lead to an easing in standards and a proposed loan deposit scheme for first home buyers.
ANZ Head of Australian Economics David Plank said the survey underscored a stabilisation in the residential property market, although he stressed that the bank did not foresee any imminent recovery in house prices.
“Since April we’ve been flagging that there were emerging signs of stability in the residential property market,” Plank said.
“In particular, we noted the fact that pace of house prices declines was slowing and that the auction clearance rate was beginning to rise.”
“Over the past month lower interest rates, the proposed change to the interest rate floor by the regulator, and the removal of uncertainty around the impact of the possible tax policy changes have boosted sentiment toward housing. This boost is reflected in the rise in the auction clearance rate in Sydney and Melbourne to its highest level in more than a year.
“The results of the latest ANZ/Property Council Survey capture this shift, with most parts of the survey showing material improvement. Of particular note is the marked improvement in credit availability. This measure has proved to be a reliable indicator of shifts in housing activity in the past and if it remains so it suggests better times ahead. Certainly it seems safe to say that the worst of the house price declines are well and truly behind us.”
Plank also welcomed the improvement in commercial property sentiment – a reading he says provides reassurance that recent weaknesses in the domestic economy and a deteriorating global environment are yet to translate into any sharp weakness in the outlook for business investment.
As for house prices, Plank noted that any significant recovery in prices would not necessarily be desirable due to its effect on housing affordability.
Main points from the survey:
- The national confidence index increased by 13 index points for the quarter to 128 points; it’s second-largest quarterly increase since the survey’s inception, reversing a year-long downward trend since June 2018.A score of 100 index points is considered neutral.
- Confidence improved across all markets, except for the ACT which fell by 13 index points. Confidence was strongest in South Australia, followed by WA, Victoria, NSW and Queensland.
- There was an improvement in forward work expectations, although sentiment remains in line with the historical average. South Australia recorded the largest increase, up by 16 index points.
- Staffing level expectations improved slightly, driven by increases in NSW and SA but again in line with the historical average. Staffing level expectations fell by 32 index points in the ACT.
- National economic growth expectations have shown a 23 index point improvement, after dropping to -19 index points in the previous quarter and returning to 4 index points for the September 2019 quarter.
- Respondents from all states and territories expect another cut to interest rates in the next 12 months (the RBA announced a cut during the survey period) and for the first time in four years, respondents believed debt finance access would improve over the next 12 months.
- House capital growth expectations are still in negative territory however sentiment has improved markedly in NSW and Victoria.
- Expectations for office and industrial capital growth improved for the September quarter. Both NSW and Victoria recorded large increases for these sectors.
- Retail capital growth expectations continue to be negative, with South Australia the only market reporting positive sentiment. Sentiment is weakest in NSW.
- Retirement living capital growth expectations increased by 4 index points, continuing the positive outlook for this sector. Similarly, hotel capital growth expectations remained positive in all markets except WA.
- Retail construction expectations have dipped into negative territory for the first time in the survey’s history, while residential construction expectations, while remaining negative, picked up by 10 index points although coming off its record low result in the June 2019 quarter.
- Sentiment towards the Federal Government soared in all states and territories, except the ACT, with national sentiment turning around by 18 index points.
- Sentiment towards state and territory governments was strongest in NSW and South Australia. Queensland recorded another quarter of strongly negative sentiment. (These results will not reflect the impact of new taxes and surcharges announced in state budgets which were handed down at the end of or after the survey period.)