Property industry confidence jumps post-election

Property industry confidence jumps post-election

5 July 2019

Property industry confidence has jumped following the federal election outcome in a positive sign for the Australian economy, but the Property Council has warned that a number of economic factors remain challenging for the industry which is Australia’s largest employer.

The latest ANZ/Property Council Survey for the September 2019 quarter shows that industry confidence has picked up by 13 index points, reversing a year of decline.

Industry confidence improved across all states and territories, except for the ACT.

“This strong sentiment bounce is driven by some welcome post-election policy certainty out of Canberra and will be an encouraging sign for the RBA and national policy makers,” said Ken Morrison, Chief Executive of the Property Council.

“However, despite this positive news, residential construction activity is set to continue to decline and this will have an impact on jobs and the economy,” Mr Morrison said.

“Following the federal election, we have had a quadrella of positive policy news which translated into a strong sentiment bounce: certainty on negative gearing and capital gains tax changes, an interest rate cut, APRA’s lending standards review and the proposed first home buyers loan deposit scheme.

“These are very welcome steps and have led to a much stronger expectations of national economic growth and the availability of credit.

“However, the property sector is not immune from the challenges facing the rest of the economy and a number of state governments have just embarked on a range of investment-sapping tax increases.

“State budgets in Queensland, Victoria and South Australia have hit the property industry with arbitrary and poorly designed tax increases which will hurt investment and job creation, and risk undermining the current sentiment turnaround,” Mr Morrison said.

ANZ Head of Australian Economics, David Plank, commented: “Since April we’ve been flagging that there were emerging signs of stability in the residential property market. In particular, we noted the fact that pace of house prices declines was slowing and that the auction clearance rate was beginning to rise.

“Over the past month lower interest rates, the proposed change to the interest rate floor by the regulator, and the removal of uncertainty around the impact of the possible tax policy changes have boosted sentiment toward housing. This boost is reflected in the rise in the auction clearance rate in Sydney and Melbourne to its highest level in more than a year.

“The results of the latest ANZ/Property Council Survey capture this shift, with most parts of the survey showing material improvement. Of particular note is the marked improvement in credit availability. This measure has proved to be a reliable indicator of shifts in housing activity in the past and if it remains so it suggests better times ahead. Certainly it seems safe to say that the worst of the house price declines are well and truly behind us. This doesn’t mean we are expecting a shift back to dramatic increases in house prices. This is not something we see as desirable given the still stretched levels of affordability in Sydney and Melbourne. Nor do we think it is likely with the more stringent credit policies that are in place.

“Also encouraging for the economic outlook was the lift in sentiment in the commercial property sector. This provides some reassurance that the recent weakness in the domestic economy and the more negative global environment hasn’t flowed through into a sharply weaker outlook for business investment.”