Confidence in Australia’s property sector remains at healthy levels as hopes of further interest rate cuts are leading to expectations of stronger housing market performance, a new survey reveals.

But skepticism about state and federal government performance remains.

Released by the Property Council of Australia in conjunction with Procore, the June quarter Property Industry Confidence Survey measures sentiment across Australia’s real estate sector.

Conducted online last month, the survey included 581 respondents from property developers, managers and agents and service providers.

According to the survey, confidence levels across the sector remain high.

Overall, the Property Industry Confidence Index remained virtually unchanged at healthy levels of 124.

At this level, sentiment is relatively high compared with historic averages since the survey began in 2011 (see chart) and is well above the 100.0 level which is considered to be neutral.

Largely speaking, the positive sentiment is being driven by expectations of improved housing market conditions which are being supported by easing monetary policy and easing constraints on debt financing capability.

A huge majority of survey participants (below -70) expect interest rates to fall over the next twelve months (a negative reading indicates expectations of falling rates) whilst a solid majority expect debt financing capacity to improve.

This is driving widespread hopes of improving housing market performance.

Expectations for house price capital growth are soaring (almost +60) whilst those for residential construction activity have shown a consistent improvement over the past twelve months and are now above historic survey averages.

Confidence is highest in South Australia (143), Queensland (137) and Western Australia (136) – markets in which the recovery in new home building activity is already well underway.

Confidence levels are lower in New South Wales (124), ACT (1111) and Victoria (104).

Despite the positive sentiment overall, survey participants remain pessimistic about economic prospects and government performance.

Overall, respondents expressed marginally negative sentiment regarding the national economy.

State economy expectations are positive in Queensland, South Australia and Western Australia but are lagging (below -20) in Victoria.

Turning to government performance, respondents are slightly negative overall about Federal Government efforts to deliver policies and actions which encourage jobs and economic growth (almost -10).

In terms of state government performance, respondents give a positive evaluation in South Australia and Queensland but are extremely critical of the Victorian Government (lower than -50).

A strong majority of respondents believe that housing supply and affordability remains the most critical property related issue which state and federal governments need to address.

In other survey findings:

  • Forward work expectations declined across every state except Queensland – signalling potential softening in future project pipelines, especially in Victoria and the ACT.
  • Capital growth expectations remain positive in residential, industrial, retirement living and hotel sectors, while sentiment for office and retail assets remains mixed.
  • Staffing expectations rose in most markets, reflecting ongoing demand for skilled labour, despite pockets of softening in some regions.

The latest survey comes amid increasing signs that the market for new home building is picking up.

Building approvals have been on an upward trend since e the middle of last year.

Forecasters generally expect a recovery in home building activity to strengthen as we move throughout the new financial year.

Commenting on the results, Property Council of Australia CEO Mike Zorbas welcomed the latest reading but called on governments to do more to unlock new housing opportunities.

In particular, Zorbas is critical of surcharges which various states apply to stamp duty for foreign property investors on property purchases.

Whilst the surcharges are a source of revenue for cash strapped state governments (and are popular among voters who fear foreign property owners snapping up scarce housing), the Property Council has long argued that they scare off critical foreign capital which is critical for financing of new development projects.

Zorbas also called for further planning reform and a nationally coordinated effort to unlock housing and infrastructure supply at scale.

“The property industry is holding its nerve, but we need governments to get serious about tax and investment settings that will help Australian businesses attract overseas capital partners for the assets our cities need,” Zorbas said.

 

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