ANZ-Property Council Survey: overall sentiment down, but residential confidence up

The ANZ-Property Council Survey for the December quarter shows a decline in sentiment in Australia’s property sector. The decline was driven by a fall in commercial property sentiment. Sentiment in the residential sector rose strongly for a second quarter.

The recovery in the residential sector is evident across a broad suite of indicators, with expectations for prices extending the recovery seen last quarter. A further improvement in credit availability and ongoing expectations of rate cuts are supporting the bounce.

The improvement in residential confidence was concentrated in the eastern states, while confidence in South Australia and Western Australia fell.

The recovery in the residential sentiment indicators is encouraging. But the reality is that credit availability is unlikely to return to pre-Royal Commission levels. Consequently, we expect that the recovery in prices and construction will be more moderate than what the rebound in the survey indicators suggests.

In contrast, sentiment was weaker in the commercial property sector, where the outlook for office, industrial, retail, aged care and accommodation segments all declined. Sentiment remains weakest in the retail sector by a large margin.

ANZ Senior Economist, Felicity Emmett, commented:

“Signs of recovery in the residential property market have been emerging for some months now, with sentiment turning around convincingly in May. Since then, auction clearance rates have picked up sharply, prices have been rising strongly in Sydney and Melbourne for two months, and housing finance is starting to pick up. Interest rate cuts (both actual and anticipated) and regulatory easing have been the key drivers of this turnaround.

“The continued improvement in credit availability suggests that construction activity, and not just prices, should begin to pick up in the coming months.

“The December quarter ANZ-Property Council survey shows that confidence in Australia’s housing sector has extended its rebound. The sustained bounce in sentiment in response to interest rates cuts, regulatory easing and the removal of uncertainty about tax arrangements is very encouraging.”

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