Confidence among Australian property professionals is crumbling

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  • Confidence among Australian property professionals hit the lowest level on record in the latest ANZ-Property Council Survey for the March quarter.
  • The weakness was particularly acute in New South Wales and Victoria, those states where residential property prices fell the most in 2018.
  • Sentiment towards the outlook for residential construction also hit the lowest level on record, fitting with recent building approvals data.
  • Confidence levels among commercial property experts also softened in early 2019, but not as much as those in the residential space.
  • ANZ Bank says the survey results, coupled with recent data, points to an “extended period of weakness in the housing sector”.

Confidence among Australian property professionals continues to weaken, hitting fresh multi-year lows in early 2019, according to the latest ANZ-Property Council Survey.

Unsurprisingly, sentiment was particularly acute among those working in the residential property sector, mirroring so many other housing market indicators that currently sit at multi-year lows.

It fell to the lowest level in the six-year history of the survey, pushing below the previous lows seen in early 2012.

ANZ Bank

“While this is clearly a very soft result, it is not surprising given the weakness evident in most other housing indicators,” said David Plank, Head of Australian Economics at ANZ Bank.

“Many indicators are around their worst levels in many years. Housing prices, credit, auction results, days on market and vendor discounts are all weak. And, importantly, there is little sign of improvement.

“The ANZ-Property Council survey is consistent with these other indicators and suggests we are set for an extended period of weakness in the housing sector.”

Based on responses received in the latest survey, ANZ said the availability of finance, or lack thereof, was a major factor behind the continued deterioration in sentiment.

“More than 50% of survey respondents expect finance availability to worsen in the year ahead, compared to just 10% expecting it to improve. We also think that the broad credit environment is likely to worsen before it gets better,” Plank said.

“The ongoing implementation of Comprehensive Credit Reporting (CCR) will give lenders greater visibility around borrowers’ debt obligations and likely weigh on people’s borrowing power.

“The final report from the Royal Commission — due by February 1 at the latest — also presents some down-side risk to the credit outlook.”

With concerns about tighter lending conditions elevated, views towards the outlook for home prices also weakened noticeably, particularly among respondents on the eastern seaboard.

“The pessimism is mostly centred on New South Wales and Victoria, Plank said.

“Of the respondents that operate in the residential sector in New South Wales and Victoria, a net 76% and 64% respectively expect housing prices to fall next year. There has been a sharp downward shift in sentiment in the ACT.”

ANZ Bank

With the exception of the ACT, the views expressed by those working in New South Wales and Victoria aren’t all that surprising given the capital cities in those states — Sydney and Victoria — lead price declines in 2018.

According to latest data from CoreLogic, Sydney’s median house price has already fallen by more than 10% from their peak in late 2017. While Melbourne’s decline has been smaller to date, partially reflecting that its downturn started later than Sydney, given current trends prices in that market look set to extend further in the months ahead.

ANZ is forecasting that prices in Sydney and Melbourne are likely to fall again in 2019, eventually leaving the decline from peak to tough in these markets at between 15% to 20% in nominal terms.

Given pessimism towards the outlook for prices, views towards the outlook for residential construction also softened in the latest survey, lead by downbeat sentiment in Australia’s most populous states.

ANZ Bank

“The construction outlook is not quite as weak as that for prices, although still in negative territory, with a net 28%, 20% and 10% expecting construction to fall across New South Wales, Victoria and nationwide respectively through 2019,” Plank said.

The national reading was the weakest in the history of the survey, and fits with recent data on building approvals which plunged to the lowest level in over five years in November, according to data from the ABS.

Mirroring the themes seen among those working in the residential space, confidence towards the commercial property sector also weakened in the latest survey, falling to the lowest level in three years.

However, overall confidence levels among this cohort remains significantly higher than those working in the residential sector, particularly for those working outside of retail where sentiment fell to the lowest level since early 2013.

“We are not unduly concerned by this shift,” Plank said.

“Sentiment is still sitting around historically strong levels, and is reported to have a much better outlook than its residential counterpart.”

In other interesting tidbits from the March quarter survey, most property professionals still believe the next move in the RBA cash rate will be higher, a view in contrast to current pricing in financial markets which favour the next move being a cut.

Despite the headwinds facing the sector, most still expect hiring and construction activity to remain firm in the period ahead, outside of the residential sector.

The survey captured responses from 1,043 property professionals across the country.

NOW READ: The great uncertainty for Australia is no longer if the housing downturn will drag on the economy, but rather by how much

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