Property industry confidence is gradually picking up, albeit very cautiously, according to the ANZ/Property Council Survey for the December 2020 quarter.
Stimulus measures such as the HomeBuilder grant as well as support from state and territory governments for new and first home buyers are driving up sentiment for the residential construction sector.
The ANZ/Property Council Survey national confidence score for the December 2020 quarter increased by 6 index points to 82 – still well below a neutral score of 100 and the survey historical average of 123.
Property Council of Australia chief executive, Ken Morrison, said stimulus measures such as HomeBuilder were providing a much-needed boost for the property industry at a critical time.
“As the scheme has become available in all states and territories we have seen a big lift in sentiment among those in residential development,” he detailed.
“The challenge will be maintaining this momentum beyond December when the current scheme expires and we are looking at a huge drop in population growth due to closed borders,” Mr Morrison said.
He noted that there is still a long way to go before property industry sentiment returns to its pre-COVID levels.
“Government stimulus measures will be essential to helping our industry drive economic recovery,” Mr Morrison said.
“As household income supports such as JobSeeker and JobKeeper are wound back over the next few months, all levels of government will need to step in with incentives that will deliver fast and effective stimulus to build momentum for recovery.”
The December quarter result followed a 14 index point improvement in the September quarter after confidence levels dipped to their lowest level in the survey’s history in the June 2020 quarter.
The majority of markets surveyed reported an improvement in sentiment, with Western Australia recording a 25 index point jump to return to positive territory and led the country at 107, followed by South Australia (98), New South Wales (84), the ACT (81), Queensland (79) and Victoria (64).
Overall, national expectations around forward work schedules and staffing levels remain negative, although WA and SA recorded slightly positive staffing level expectations.
75 per cent of developers operating in the residential sector said they expected the Federal Government’s HomeBuilder scheme would have a positive impact for their business over the next quarter, up from 68 per cent in the previous survey.
After dipping in the June 2020 survey, residential construction expectations for the next 12 months have remained in positive territory at 9 index points.
Industrial construction expectations continue their upward trend and lead the survey at 34 index points. Retail construction has the most negative outlook at -22 index points, followed by hotels at -18 index points and the office sector at -14 index points.
ANZ Senior Economist, Felicity Emmett, said property sentiment has improved a little but remains depressed in the wake of COVID-19 and the associated restrictions put in place by the federal and state governments to limit its spread.
“The impact remains widespread across states and sectors, with sentiment in the tourism, office and retail sectors still extremely weak. In contrast, the industrial property sector has strengthened alongside the acceleration in e-commerce,” Ms Emmett said.
“While sentiment in the housing sector remains negative, it is clearly improving. The residential construction outlook is a highlight, helped by the Federal Government’s HomeBuilder program.”
She noted that the scheme, along with other state government initiatives, is clearly giving the housing construction sector a boost, although with population growth dropping sharply and the rental market under pressure, headwinds remain for the housing sector.
“While sentiment is very weak, government support has clearly helped to prevent the worst. HomeBuilder, JobKeeper and the raft of other government stimulus measures are helping to underpin sentiment,” Ms Emmett said.
“Looking ahead, the recent Federal Budget should build confidence both in the property sector and more broadly, although the outlook remains extremely challenging and further stimulus may be required over coming months.”
There were 857 respondents to the online survey between 7-23 September 2020.
Below are some key findings in the most recent ANZ/Property Council Survey:
- National confidence levels increased by 6 index points to 82 for the December 2020 quarter – still well below the historical survey average of 123.
- National forward work expectations are negative for the third consecutive quarter, although improved slightly to -5 from -8 for the previous quarter.
- National staffing level expectations are negative for the third consecutive quarter, although improved slightly to -5.
- National economic growth expectations are at -52 index points, the third-lowest level in the history of the survey, and negative for the fifth consecutive quarter.
- 51 per cent of respondents believe the future impact of COVID-19 on their business will improve over the next three months, 31 per cent believe there will be no change, and 18 per cent believe impacts will get worse. Sentiment is most positive in South Australia, and most negative in Victoria and the ACT.
- 58 per cent of respondents believe Hotels, Tourism and Leisure sector will be most severely impacted by COVID-19, followed by shopping centres (18 per cent) and commercial office (16 per cent).
- 47 per cent of survey respondents have accessed the Federal Government’s JobKeeper program. 29 per cent will continue to access the program from the end of September.
- Expectations for another cut to interest rates in the next 12 months have moderated slightly, while debt finance availability is expected to continue to be difficult to obtain. (Note: The Federal Treasurer’s announcement of changes to responsible lending obligations was made following the end of the survey period.)
- House capital growth expectations remain negative with sentiment most negative in Victoria and NSW. WA, SA and the ACT recorded slightly positive expectations.
- Office capital growth expectations continue to be negative at a near-record low of -63 index points
- Retail capital growth expectations remain negative, for the tenth consecutive quarter at -63 index points
- Industrial capital growth expectations are positive, up by 12 index points for the quarter – the only non-residential sector to record positive sentiment for the December 2020 quarter.
- National retirement living capital growth expectations fell to -10 index points.
- Hotel capital growth expectations remain strongly negative at -69 index points.
- The outlook for new retail, office and hotel construction is negative while industrial (34 index points) and residential (9 index points) improved this quarter.
- Prime and secondary cap rates are expected to ease across all markets over the next 12 months (with the exception of ACT prime cap rates).
- Confidence in the Federal Government’s performance in delivering policies that encourage jobs and economic growth fell by 17 to 31 index points. The WA, SA and NSW state governments all recorded positive sentiment, with the ACT, Queensland and Victorian governments recording negative sentiment on their performance.
More information on the ANZ/Property Council Survey can be found here.