Confidence within the property sector throughout Australia has dropped as concerns about inflation and skills shortages has grown, a survey of more than 750 property industry decision makers has found.
But industry participants remain confident overall on account of solid pipelines of growth.
Published by the Property Council of Australia in conjunction with ANZ, the Property Industry Confidence Index has fallen by 19 points from 137 in March to 118 in June.
At this level, the index is below the survey’s historic average of 123 but remains above the 100.0 level which separates optimism from pessimism.
Leading the decline was a sharp reduction in expectations for economic growth.
All up, firms are more pessimistic about prospects for the state and national economy compared with any other time since the survey’s inception since 2011.
Meanwhile, almost all survey participants expect further hikes in interest rates whilst concern about the availability of debt finance is growing.
But firms remain confident about their own forward pipelines and staffing levels amid an ongoing pipeline of work – albeit with future work level expectations easing back in every market except for WA.
The survey also found that:
- The impacts of COVID linger, with respondents in most states expecting the pandemic to further hinder business conditions. Additionally, the survey found the virus is expected to cause the greatest impact to the commercial office sector. Until this most recent survey, the hotels, tourism and leisure sector has consistently ranked highest in terms of COVID impacts.
- Consistent with previous surveys, housing supply remains the most pressing critical issue for governments to solve at both the federal and state levels. This ranks above (in order) energy, environment and emissions; economic management; tax reform; planned population growth and cities and infrastructure delivery.
It should be noted that the survey did not ask about construction costs or project delays. Accordingly, the impact of supply constraints may not be fully reflected in current results.
In addition, the survey was conducted between 6 and 22 June – prior to the latest rise in interest rates.
Property Council of Australia Chief Executive Ken Morrison said despite the decline in confidence caused by larger external factors such as inflation, skill shortages, and disrupted supply chains, the sector remained positive about its own work pipelines and staffing plans.
“What we’re seeing in this survey is a steep confidence dip in the broader outlook, yet specific firms remaining optimistic about their own business conditions,” Morrison said.
“There is no doubt that the lingering effects of COVID, inflationary pressures and interest rate implications, energy and staffing shortages as well as global geopolitical issues, have left a dent in confidence, and that comes as little surprise.
“However, when asked to reflect on their own business plans, respondents felt well-positioned to withstand those headwinds, which is why, combined with historic low unemployment figures, confidence overall is still in positive territory,” he said.
ANZ Senior Economist Felicity Emmett said property sentiment is being impacted by rate rises, expectations of further rate increases and concern about the global outlook and a US recession.
But she said that pessimism expressed in the survey appeared to have been overdone given levels of optimism surrounding firm’s own workflows.
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