Confidence in the property sector is at its lowest point in more than five years and expectations around the availability of finance – key for the health of building and transaction activity – has worsened to its lowest on record, according to more than 1000 industry experts.
The ANZ/Property Council Survey reported that overall confidence within the property industry fell by three points down to 123 index points – the lowest result since September 2013.
“One of the big engines of the Australian economy is slowing, hit by tightening access to finance, softening forward work schedules, and a less optimistic view of the economy,” Property Council of Australia chief executive Ken Morrison said.
“It’s a message our political leaders need to heed, with the final report of the banking royal commission due in February, an election in NSW – our most populous state and biggest property market – and then a federal election in May.”
He reiterated that is was “not the time to be making changes to policies, which undermine certainty, confidence or incentives to invest in Australian property”.
While most operators in the sector expect interest rates to go lower, the actual ability to get a loan has worsened.
ANZ’s head of Australian economics David Plank said finance availability was a key determinant behind forecasts on house price, which will continue to slide into 2019 and 2020.
“Survey respondents report that the availability of finance will worsen further over the coming year, which is a central feature of our housing outlook,” Mr Plank said, “In turn, respondents also expect housing prices and construction activity will continue to ease.”
“We think prices will fall through to 2020, and expect to see declines around 15-20 per cent peak to trough for Sydney and Melbourne. We also think the decline in housing construction will accelerate through 2019 and 2020, as the current backlog of work is gradually completed.”
K&L Gates partner Samuel Brown said the availability of finance was crucial for developers trying to secure off-the-plan buyers.
“The tightening of credit and falling residential property prices is adversely impacting purchaser financing to complete off-the-plan acquisitions,” Mr Brown said.
“Developers are keen to complete their projects sooner to mitigate potentially worsening conditions. Falling prices may also lead to delays in launching new projects.”
While the residential sector was feeling the pain, commercial property is still glowing with survey respondents forecasting more capital gains to be made in office towers, industrial sheds and hotels across the country.