Confidence within the property sector within Australia has hit its lowest level in three years amid growing levels of concern about residential market oversupply and a weakening state of the economy as well as political uncertainty at the federal level and disappointment about a number of policy decisions at the state level, the latest survey results indicate.
Unveiling the results of the September quarter version of a survey it conducts in conjunction with ANZ, the Property Council of Australia said its Property Industry Confidence Index had dropped back by three points to fall from 131 in the June quarter to 128 in the September quarter – well above the 100.0 level which separates overall sentiments of optimism from those of pessimism but still the lowest level on record since the September quarter of 2013.
Participants remained optimistic about hiring intentions as well as capital growth prospects in retail, accommodation and retirement living but expected virtually no capital growth in either the office or residential sectors and were anticipating subdued conditions ahead with regard to the overall economy.
Debt finance was also expected to become more difficult to obtain as banks continue to pull back in terms of lending activity and confidence levels with regard to forward work schedules, construction activity and hotel capital growth all declined despite remaining in positive territory overall.
Meanwhile, dissatisfaction with government performance in terms of efforts to plan and manage growth is on the rise, especially in light of recent decisions on the part of three states to increase taxes paid by foreign investors on property.
In its most recent budget, for example, the New South Wales government imposed a 4 percent surcharge on stamp duty paid by foreign residents with regard to residential land as well as a 0.75 percent surcharge on land taxes.
This follows moves on the part of Queensland to introduce a 3 percent surcharge on foreign purchases of houses and apartments along with a similar surcharge of 7 percent in Victoria.
With the exception of New South Wales and the ACT, participants expressed negative sentiment about the performance of all state governments in planning and managing growth, with Queensland scoring worst in this area.
Whilst the new taxes along with uncertainty over federal politics played a part in the fall in confidence, however, Property Council of Australia chief executive officer Ken Morrison said the survey reflected bigger expectations that the property cycle was turning.
“We are definitely moving through the top of a construction cycle,” Morrison said. “This ANZ Property Council survey is a sentiment survey and it is therefore a leading indicator of what we might see into the future.”
“While confidence is still positive, confidence levels have dropped down a bit. With that, alongside some other indicators, what we are seeing is that the big property cycle is starting to turn even in our growth states in New South Wales and Victoria.”
Morrison said governments at both federal and state levels should look for opportunities with regard to anything that could be done to keep activity stronger over a longer timeframe in a sector which has delivered a significant boost to the economy over recent years and which needs to deliver high volumes of new housing stock on a consistent basis in order to address housing affordability issues.
Based on feedback from almost 1,600 respondents, the survey was conducted in June and does not, therefore, reflect the election result.
However, the survey responses may well have been influenced by sentiments of uncertainty as a result of the lead up to the election.