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Despite confidence in the property market industry remaining strong over the latest quarter, a new survey showed firms are concerned about where the rising macroeconomic headwinds will take businesses.
The ANZ/Property Council survey’s confidence index rose by one point on a quarterly basis to 119 in September, remaining significantly above the neutral score of 100 and slightly below the long-term average of 123.7 index points.
The survey of almost 750 respondents — conducted between 29 August and 13 September this year — also found that confidence levels in the states and territories remain high, with sentiment in the ACT (135), Western Australia (131), and NSW (121) higher than the national average.
Other states were not far behind, as South Australia (115), Victoria (115) and Queensland (114) all remained in positive territory.
Over the quarter, future staffing level projections were strong in all states and territories, with the national average sitting at 22, significantly above the historical average of 16.6 and safely above the zero score deemed as neutral.
Property Council of Australia chief executive Ken Morrison said the results reveal companies remain assured about their own work schedule and staffing levels.
However, he acknowledged that there is an ongoing “tug of war” regarding confidence, with negative expectations related to the broader economy at odds with optimism about internal business among market players.
“Confidence in the property industry is torn between the largely positive indicators within their own businesses and the swift-moving uncertainties in the macroeconomic environment,” Mr Morrison said.
On the downside, the executive said that external factors such as interest rates and construction costs are weighing on sentiment. Mr Morrison also merited the skill shortages and recessionary fears in Europe and the US as giving a real “cause for concern” among businesses.
On the one hand, he pointed out that there are still positives to look forward to, as work pipelines and employment expectations look strong.
“While property industry confidence went up slightly, it masks these strong forces pulling sentiment in opposite directions,” he said.
Future work expectations also remained in positive territory, but saw dips in every market except NSW and the ACT. The national index for future work expectations clocked in at 37 during the period — slightly above the historical average of 36.8.
However, the report noted that COVID’s effects continue to be a chip on the industry’s shoulders, with respondents in most states expecting the pandemic to worsen business conditions.
The pandemic is seen to have the biggest impact on the commercial office sector, according to the survey, with the hotel, tourism, and leisure sectors closely behind.
“The office market is still feeling the impacts of recent Omicron waves, with our most recent Office Occupancy Survey showing the number of people in the office is holding firm, but still well below pre-COVID levels,” Mr Morrison said.
Respondents’ are also bracing for a decline in property prices, with Western Australia named as the only state to weather the downturn and post positive price growth over the next 12 months.
“Consistent with previous surveys, housing supply and affordability remains the most pressing critical issue for governments to address at both the federal and state levels,” Mr Morrison commented.
ANZ senior economist Felicity Emmett said higher interest rates and the prospect of further increases are taking their toll on property sentiment.
“Firms remain quite negative about the broader economic outlook, but are still relatively upbeat about their own prospects. Rate hikes, both actual and prospective, access to finance, and rapidly rising costs are all headwinds for sentiment,” Ms Emmett said.
She also noted that while the outlook for economic growth gathered some upward momentum in the September survey, it continued to be below the long-run average.
“Sharply rising inflation, a steep interest rate cycle and a deteriorating global backdrop are all weighing on the economic outlook,” she said.
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