NSW sees biggest fall in confidence in property outlook

The ANZ-Property Council Survey for the June quarter shows a further decline in sentiment in Australia’s property sector.

Confidence has hit a new low and is now at the lowest level since the survey began in 2011.

Residential property continues to lead the fall in overall sentiment.

Nearly all the key residential indicators declined further in the June quarter, with sentiment, prices and construction all reaching fresh lows. 

"Importantly though, the outlook for credit availability improved, tentatively suggesting that the housing sector is reaching an inflexion point," it noted.

The largest decline in confidence came in New South Wales, which is consistent with the fact that Sydney has seen the most marked weakness in house prices.

Not far behind was Victoria, while Queensland, South Australia and Western Australia saw more moderate declines. 

But ANZ Head of Australian Economics, David Plank, commented that the most important aspect of the latest ANZ-PCA property survey could be the improvement in the availability of finance.

"It was a modest improvement in this part of the survey in mid-2017 that signalled greater stability in the housing market later that year and in early 2018.

"Finance availability then deteriorated sharply, continuing to fall through the rest of 2018 and into 2019.

"We think this deterioration was the trigger for the renewed house price weakness in Sydney and Melbourne from that point.

"The turn in finance availability captured in this survey could signal a turn in the market.

"Certainly it suggests we may be past the worst of the downturn in building approvals.

"We need to be cautious, though, about the outlook."

He added finance is still difficult to get, and sentiment in the residential property space is very negative.

"This primarily reflects the price outlook, which has fallen further in New South Wales and Victoria.

"Sentiment does tend to lead rather than follow prices, however, certainly over the past few years.

"We think the continued downturn in price sentiment reflects recent developments rather than indicating a deterioration in the outlook.

"The shift in expectations with regard to interest rates may help the outlook.

"Still, we expect further declines in house prices this year."

Outside residential, sentiment is much better. It has, however, declined from its recent peak across most sectors. Sentiment in the retail sector is especiallysoft, which is not surprising.”

Sentiment declined in the commercial space as well, although it remains much more positive than is the case for residential.

Declines in confidence were seen in all segments (retail, tourism, office) except industrial. 

It noted forward work schedules have declined, but remain elevated, reflecting the fact that the amount of work in the pipeline remains substantial but is past the peak. Consistent with the decline in the construction outlook, hiring intentions have also come down.