Consumer confidence, funding and lack of development sites the biggest challenges for commercial property businesses: NAB index

Consumer confidence, raising financing and a lack of suitable development sites remains the biggest challenge facing the commercial property sector, according to the NAB March commercial property survey.

Respondents to the survey also have modest interest rate cut expectations over the next 12 months with just 10 basis points expected to be shaved from commercial lending rates.

While consumer confidence remains the biggest challenge facing the sector, just 14% of the 300 survey respondents – mainly commercial property owners, developers, managers and estate agents – identified it as such compared with 22% in the December 2012 quarterly survey and 20%, six months ago.

This could rise in the June quarter survey with yesterday’s Westpac Melbourne Institute Index of Consumer Sentiment falling by 7% from 104.9 in April to 97.6, pushing it back into a range where pessimists outnumber optimists for the first time since October 2012.

Tellingly for commercial property businesses, the biggest drop – 13.2% - was in the sub-index measuring sentiment about the economy over the next 12 months, which has fallen to 90.8 points, well below the 100 points neutral setting.

Concerns about consumer confidence are greatest in Queensland (22% of respondents from that state) with Queensland also the state where industry sentiment is weakest.

In contrast, just 6% of respondents in South Australia/Northern Territory listed consumer confidence as a challenge.

The two other major challenges emerging from the survey are the ability for commercial property businesses to access funding or financing as well as the availability of property development sites for new projects or a lack of suitable sites.

Financing and funding challenges are greatest in South Australia/Northern Territory (19%) while the challenge of finding suitable development sites is greatest in WA (22%) and Victoria (16%).

The survey also asked respondents about the upcoming federal election with uncertainty about the September 14 poll a key concern, especially in Queensland (15%) and NSW (13%).

Concerns about government regulation and red tape increased slightly from the December quarter survey, but are down from a year ago.

The survey also found that around 19% of the survey panel anticipate higher interest rates in the next 12 months, 38% expect them to fall and 43% see no change.