One speed economy emerges, finds latest survey
While industry confidence has dipped a fraction, all states and territories are optimistic about staffing levels and forward work schedules over the next quarter, finds the latest ANZ/Property Council Survey.
Nationwide confidence fell slightly from 141 to 139 for the March 2018 quarter with state performance converging. A score of 100 is considered neutral.
Ken Morrison, the Property Council’s chief executive, says the construction outlook is positive across all states and territories, and in the various market sectors of the industry.
“The industrial property, retirement living, and tourism sectors are reporting the strongest construction outlooks since this survey began,” Morrison says.
Daniel Gradwell, ANZ’s senior economist, says the industry’s optimism is supported by data.
“Commercial building approvals are trending around the highest levels on record, led by the offices and tourism segments,” Gradwell says.
Non-mining firms expect the current financial year to post the strongest investment growth in a decade, with the “vast majority” of this growth from buildings and structures.
“In line with the strong construction pipeline, firms report that they will have solid demand for staff over the next 12 months,” Gradwell adds.
While staffing expectations remain “elevated”, they have pulled back slightly, but Gradwell suggests this is “not surprising” given 2017 was “one of the strongest years of employment growth in recent history”.
The state-by-state story
Morrison says the survey reveals “the tightest state convergence” in its six-year history.
New South Wales was the most confident state for 15 consecutive quarters, but has now been overtaken by Victoria, which leads the pack with a score of 145. Queensland comes in at the rear at 132.
The Property Council’s Victorian executive director, Sally Capp, says the state is now the “standard-bearer” for construction industry sentiment.
She says robust levels of confidence will support future job growth, but that the industry remains lukewarm on government management of the economy.
In NSW, confidence dropped seven index points from 147 to 140 over the quarter and nine index points in the 12 months to March 2018.
Jane Fitzgerald, the Property Council’s executive director in NSW, points to capital value expectations for the residential sector, at their lowest point since September 2012, and expected construction activity, also at its nadir since the survey’s inception.
“The NSW industry is still strong, with a healthy outlook for capital value expectations in both the office and industrial sectors, and staff hiring expectations; yet we must look at what can be done to ensure our industry continues to deliver for NSW,” Fitzgerald says.
Western Australia is showing clear signs of emerging from its mining-boom hangover, with a remarkable 42-point rise in confidence over the last year. Confidence in WA rose from 129 to 140 index points in the March quarter, bringing it equal to NSW and second only to Victoria.
“Increases in expected house price growth, retail growth and a steady retirement living sector all contributed to the increase in confidence,” explains the Property Council’s executive director in WA, Lino Iacomella.
Queensland is now the least confident market in the country, down from 134 to 132.
The Property Council’s executive director in Queensland, Chris Mountford, says the impact of proposed tax increases – namely land tax rates and the foreign investor tax – can already be seen in the figures.
“Forward work schedules, staffing level expectations, and Queensland’s economic growth predictions are all down. Abandoning the proposed tax increases would send a strong message to the industry that they can have confidence to invest in Queensland,” Mountford says.
Gradwell says ANZ is “encouraged” by the convergence across the states and territories.
“It’s not just housing any more – the pipeline of commercial property is also significant,” he adds.
The firms surveyed remain unconvinced that interest rates will rise in 2018. However, ANZ forecasts that the Reserve Bank will lift the cash rate twice, around the middle of the year, as it becomes more confident “that we are past the trough in both wages and inflation,” Gradwell adds.
Find out more about the ANZ/Property Council Survey and our supporting sponsor RCP.
The March quarter survey prize winner is Tom Bartlett, from Knight Frank.