Industry confidence on the up and up

Industry confidence on the up and upConfidence across the property sector has lifted to its highest level since 2014, with a boost in optimism in Western Australia driving the upswing, finds the latest quarterly ANZ/Property Council Survey.Nationwide confidence rose from 132 to 135 for the June 2017 quarter. A score of 100 is considered neutral.The sentiment survey is the largest of its kind with more than 1,600 industry professionals participating.Confidence in the West rose from 98 to 118 – one of the largest lifts in a single quarter ever recorded by this survey – as a result of the state election, forward work scheduling and staffing expectations.While NSW continues to record the highest level of confidence of any state or territory, the latest results report a fall from 149 to 145. This was the first confidence survey conducted following the change in the state’s leadership.The Property Council’s chief executive Ken Morrison says it is “remarkable” to see increasing confidence “despite a hardening view that interest rates will increase and that the banks will continue to tighten credit.”National forward work schedules, staffing expectations and growth expectations are all trending up,” he adds.Sixty six per cent of survey respondents expect their forward work schedules in the commercial sector to increase over the next 12 months, and 47 per cent expect their staffing requirements to increase.For the first time in the survey’s history, housing affordability is rated as the number one economic issue.”Nationwide, we are expecting capital growth in housing prices, with all states reporting a lift in confidence. However, the industry is concerned about the broader economic impact of rising house prices.”Morrison says office capital growth expectations, while not as strong as those in the residential sector, have also improved. “Sentiment has increased for construction activity in the office market sector by six points over the past year.”The state government performance index recorded negative sentiment in every state and territory except New South Wales. The rating of the federal government has deteriorated in every jurisdiction.The “deep disillusionment” reported in opinion polls appears to be “making its way into industry sentiment about governments of all political persuasions,” Morrison says.All jurisdictions have also reported falls in foreign residential property sales over the past three months.David Plank, head of Australian economics at ANZ, says one area of agreement across the states is that the availability of debt finance continues to tighten.”Funding conditions are now at their worst in five years. This is consistent with banks tightening their lending criteria, especially in the residential space. “We have also seen banks’ funding costs increase, and this has been passed on through out-of-cycle interest rate hikes in recent weeks.”Despite tighter funding conditions and the likelihood of higher interest rates, expectations of house price growth continue to rise. “Higher indebted households are certainly vulnerable to any significant increase in interest rates, but still strong sentiment in the sector appears to be underpinning the strong price outlook,” Plank adds.”The ANZ/Property Council Survey shows an improving outlook for the property market and the Australian economy, which is broadly consistent with recent data flow,” Plank concludes.Find out more about the ANZ/Property Council Survey and our Supporting Sponsor RCP.