ACCORDING to new research from the Property Council of Australia and ANZ, the NSW and Victorian property markets have been hit by declining confidence, while resource-driven states are increasingly positive.
The latest Property Council-ANZ Property Industry Confidence Survey, released last week, reveals that positive sentiment grew in all states and territories with a strong resource base – the Northern Territory, Western Australia, Queensland and South Australia.
However, sentiment fell in the states with the largest property markets, New South Wales and Victoria, as well as in the ACT and Tasmania.
The survey polled 2,800 property industry professionals across all Australian states and territories in December 2011.
It found confidence across Australia rose slightly in the three months to December, from 104 to 107 on the survey index, driven principally by resource-rich states. A value of 100 represents a neutral position on the index.
According to the research:
- The Northern Territory leads the nation in confidence, rising 25 points from 120 to 145, following recent announcements about the $30 billion INPEX Ichthys gas field project;
- Northern Territory pushed Western Australia, which is also rising in confidence (from 122 to 127), into second place;
- Queensland has rebounded since September's survey, up from 103 to 113, driven by resource sector growth, greater confidence about commercial property and non-residential construction activity;
- Despite a weak housing market and a sluggish commercial property outlook, several large infrastructure and resource projects have lifted overall sentiment in South Australia (from 99 to 105);
- Both the ACT and Victoria moved into negative sentiment territory. The ACT (from 102 to 94) recorded the sharpest three-month negative swing in sentiment, due to declining prospects in most property sectors, particularly commercial property. In Victoria (from 100 to 97), there is a perception that "economic juices" are slowing after a long run of demographically driven growth;
- NSW recorded a slight decline in confidence (107 to 105) but despite placing below the national average, it remains in positive territory; and
- Tasmania recorded the lowest confidence levels, down three points since September's survey to 85.
The survey found that property industry professionals are convinced that further rate cuts are in the pipeline and that credit will become increasingly more difficult to obtain, particularly in NSW, Victoria and Queensland.
According to the research, Australia's economic prospects are viewed negatively, due to concerns regarding European sovereign debt, a sluggish US revival and disenchantment with political leadership.
Property Council Chief Executive, Peter Verwer, said overall, property professionals have a reasonably positive view of the sector's short-term future.
"However, it is clear that Europe's debt woes, a slow recovery in the US and disappointment in Australia's political leadership are making property participants nervous about Australia's economic prospects," Mr Verwer said.
"Of particular concern for property players is NSW. While it is too early to say that investors have placed the state on 'credit watch', almost a year into a new government it is clear there is a growing disillusionment in the state's rate of progress."
ANZ Global Chief Economist, Warren Hogan, said that while the commercial property market is showing signs of a multi-year cyclical upswing, the outlook still holds risk.
"Considerable uncertainties in Europe, the Middle East, the US and China threaten economic and financial market stability and will continue to weigh on investor sentiment and property yields," Mr Hogan said.
"Consumer restraint, reduced workspace ratios, employer caution and potential job shedding all present significant risks to commercial property demand."
"Nonetheless, ANZ's outlook for commercial property remains positive. Tight vacancies, limited capacity expansion and attractive yields will support growing investor interest and are laying the groundwork for a marked increase in valuations as rents rise and yields compress," Mr Hogan said.