Pessimism among Australian property professionals hits new highs

Leon Neal / AFP / Getty Images
  • Confidence among Australian property professionals has fallen to the lowest level in at least six years.
  • Residential property specialists remain the most pessimistic with views towards sentiment, prices and construction all hitting record lows.
  • Those working in New South Wales and Victoria remain the most pessimistic in the country. Home prices in these states have fallen the fastest over the past 12 months.
  • The downbeat mood came despite improved views towards the ability to obtain finance and growing expectations the RBA will cut rates.
  • Pessimism also increased across the commercial property sector, lead by those working in the retail space.

Confidence among Australian property professionals has fallen to the lowest level in at least six years, according to the latest ANZ Bank-Property Council of Australia survey.

“Confidence in Australia‚Äôs housing sector has fallen further, reaching a new low since the survey commenced in 2011,” said David Plank, Head of Australian Economics at ANZ Bank. “While the persistent weakness in the index is disappointing, it is consistent with declines evident across a range of housing indicators.”

The deterioration was once again concentrated in residential property professionals with pessimism lifting across most states and territories, mirroring recent price trends where values have started to fall across most regions and capital cities.

“Residential property continues to lead the fall in overall sentiment,” Plank said.

“Nearly all the key residential indicators declined further in the June quarter, with sentiment, prices and construction all reaching fresh lows.”

ANZ Bank

Plank said the result indicates that sentiment “remains in the doldrums”.

The largest decline in confidence came in New South Wales. Weakness was also acute in Victoria, where property prices have also fallen sharply over the past 12 months.

“Negative sentiment… continues to be concentrated in New South Wales and Victoria where just over 70% of respondents expect housing prices to fall over the coming year,” Plank said.

“Sentiment has been lagging rather than leading prices over the past few years, with sentiment holding up in 2018 until well after the market had turned down,” he said.

“We see the decline in sentiment in the June quarter survey as consistent with recent weakness, rather than a signal of a further acceleration in the pace of decline.”

ANZ Bank

Like respondents in New South Wales and Victoria, sentiment also deteriorated in Queensland, South Australia and Western Australia in the latest survey, albeit by a far smaller degree. That result is consistent with recent movements in home prices in each state, according to data from CoreLogic.

Hinting that price movements continue to drive sentiment among residential property workers, the deterioration in sentiment came despite improved views towards access to finance, a major factor behind the recent downturn in prices.

“The most important aspect of the latest survey could be the improvement in the availability of finance,” Plank said.

“It was a modest improvement in this part of the survey in mid-2017 that signalled greater stability in the housing market later that year and in early 2018. Finance availability then deteriorated sharply, continuing to fall through the rest of 2018 and into 2019. We think this deterioration was the trigger for the renewed house price weakness in Sydney and Melbourne from that point.”

Although Plank cautions that not too much should be read into the result, noting that finance is still difficult to obtain and sentiment remains very pessimistic, he said the latest result could signal a turn in market conditions.

Like improved views on finance, sentiment was not helped by growing expectations that the RBA will cut rates, something that has acted to boost home prices during easing cycles in the past.

A net 27% of survey respondents said the RBA will cut rates within the next year, a stark turnaround to three months ago when a net 27% expected a hike within 12 months.

Like those working in the residential sector, pessimism among those working in the commercial space also increased, although most still remained optimistic as a whole.

“While the decline in confidence is disappointing, it is worth noting that sentiment remains well into positive territory — just not as positive as it has been,” Plank said.

Given recent weakness in Australian retail sales, pessimism in the retail property space remained the most acute of any sub-sector, followed by tourism, commercial and industrial property professionals.

The latest survey canvassed the views of almost 1,200 respondents, according to the PCA, including views from owners, developers, agents, managers, consultants and government workers.

NOW READ: The charts that prove Australia’s house price downturn really is BIG (and why some are concerned about what it may mean for the economy)

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