Confidence surrounding the outlook for the property and construction industry has edged up in non-mining states but has dropped back in resource-rich states throughout Australia amid increasing fears of an end to the mining boom, the latest survey indicates.
Results from the December Quarter Property Council of Australia-ANZ Property Industry Confidence Survey, which polled more than 3,500 professionals from the property and construction sector for their forward looking views, showed an overall drop in confidence, with the Property Industry Confidence Index dropping four points from 106 to remain just in positive territory at 102.
In a reversal of fortunes from previous quarters, confidence fell in resource-heavy states but edged up in New South Wales, Victoria, the Australian Capital Territory and Tasmania.
Put in perspective, however, the drop in mining state confidence is coming from very high levels, and while both the Northern Territory and Western Australia are still the top performing states by a long shot, sentiment across non-resource states remains weak.
Moreover, despite negative media stories of late, the majority of respondents (68 per cent) say the mining boom is not yet over.
Property Council chief executive Peter Verwer says the improvement in Victoria and New South Wales is encouraging.
“Respondents in these states have more faith in their local economy than the national economy, and expectations for forward work have improved,” Verwer says. “Furthermore, although sentiment for debt funding availability is still negative, the shift in outlook here bodes well for future development.”
ANZ chief economist Warren Hogan says that although economic activity will remain subdued in the short run, the medium term outlook remains solid on the back of strong anticipated growth in business investment. House prices have also shown tentative signs of bottoming out amid rate cuts earlier this year, a process which will be further supported by the latest cut earlier this month.
Key findings of the survey as set out in a joint statement between the Property Council and ANZ are as follows:
- Overall sentiment continues to trend downwards: overall sentiment on the index has moved down from 106 in the previous quarter to 102 (an index score of 100 is considered neutral). It is the second consecutive quarter of declining sentiment.
- The biggest mining states suffered the biggest declines: NT, Queensland and WA posted the largest falls in sentiment. NT dropped from 151 to 130 on the index, Queensland dropped from 113 to 96, making it the only state to shift from positive to negative sentiment over the period, WA dropped from 136 to 120, and SA also declined.
- Australia’s biggest states on the rise: expectations for forward work have increased in Victoria and NSW. Respondents there have more faith in their own states than in the national economy. The outlook for office space and retail sales in NSW and Victoria has improved.
- Sentiment in the residential market is rebounding: sentiment for residential capital values shifted from negative to positive over the period, from 93 on the index to 101, marking the first time in the history of the survey it has been positive. Sentiment for residential capital values rose in all states and territories, except for NT. Housing construction expectations also rose.
- Confidence in funding projects has improved, but staffing level expectations have fallen again: sentiment about the availability of debt funding improved but is still negative, moving from 93 on the index to 98. However, the outlook for forward staffing levels has fallen again and is now close to neutral. Sentiment for this measure declined from 104 to 102 on the index.
- Office on top for anticipated capital growth expectations: property professionals believe the office market has the strongest investment potential over the next 12 months, although the gap between this and other asset classes is narrowing. Respondents ranked residential as the asset class with the next highest potential for capital growth, followed by industrial, retirement living, shopping centres and hotels /tourism/leisure.