Confidence within the property industry dropped ahead of the federal election, to its lowest point since just before the previous election, despite the strong presence of foreign buyers.

The gloom was centred on the residential sector, according to the quarterly ANZ/Property Council survey of property market professionals.

Expectations for price rises were neutral in the survey conducted in June, with the number of respondents expecting rises over the coming year only marginally more than those expecting falls.

A year earlier, optimists made up 40 per cent more of the survey than pessimists.

ANZ economists Richard Yetsenga and Daniel Gradwell said some capital gains are still expected across the bigger markets of Sydney, Melbourne and Brisbane.

But more sizeable falls are expected in Perth and Darwin, thanks to the mining construction downturn.

“This state divergence is also evident across the outlook for construction activity,” they said.

Survey respondents expecting higher home building activity outnumbered those expecting falls by 20 per cent, compared to 57 per cent a year before.

“But despite this weakening outlook, a significant backlog of work remains in the pipeline, which should ensure that nationwide construction activity continues to grow, albeit more slowly than recently,” they said.

While the residential sector is flagging, the survey showed ongoing strength in the non-residential sector, which ANZ’s economists said confirmed the transition taking place across the economy.

“Sentiment in commercial property continues to be driven by strength in Sydney and Melbourne, reflecting the solid growth in their economies,” they said.

But Western Australia, still suffering from the mining investment downturn, remined weak.

“The prospect of further job losses in the mining sector increases the importance of other regions and industries picking up the slack,” Yestenga and Gradwell said.

Foreign buyers were maintaining a strong presence in both the residential and commercial property sectors.

The survey showed 23 per cent of residential sales and 17 per cent of commercial property sales in the past three months were to foreign buyers.

“Although lending criteria for foreign housing buyers has tightened in recent months, solid price growth and a stable economy means that the Australian housing market remains attractive,’ the ANZ team said.

“Similarly, while yields on Australian commercial property have steadily fallen, they remain attractive in today’s global low yield environment.”