Property industry confidence levels are approaching record highs as the sector leads Australia’s economic recovery from the COVID-19 pandemic.

The ANZ/Property Council industry survey for the March quarter found that national industry confidence soared to 142 points, the second highest level since the survey began. This represents an 80-point improvement over the last twelve months when the pandemic first impacted on confidence levels. A score of 100 is considered neutral.

Property Council of Australia chief executive, Ken Morrison, said rising confidence was being driven by record high economic growth expectations.

“When the property industry is confident it is exceptional news for the entire national economy because it employs so many people, more than 1.4 million Australians,” Mr Morrison said.

“While the economy still faces significant challenges, the property industry is clearly buoyed by the speed of our turnaround and the strong demand they are seeing, particularly in the residential and industrial sectors.

“The survey also showed an easing of concerns about the office sector as more CBD workers return to their work places.

“Government stimulus and business support measures have done their job in supporting our industry and the economy over the last twelve months.

“With many stimulus measures having now run their course, it is critical that this confidence is backed up by policymakers through measures that will continue to help reactivate our CBDs and upscale our quarantining capacity.”

The survey found national economic growth expectations jumped significantly from 13 to 38 index points, the highest level ever recorded in the survey’s 10-year history.

Capital growth expectations over the next 12 months for the housing and industrial sectors are now also sitting at the highest levels ever recorded across all jurisdictions.

Over the next 3 months, 64% of respondents believe the impact of the coronavirus outbreak on their business will improve.

ANZ Senior Economist, Felicity Emmett, commented: “Property sentiment has improved again, reflecting stellar economic performance, a large pipeline of work for the coming year and a strong outlook for property prices.”

“The combination of record low mortgage interest rates and targeted stimulus is clearly supporting the housing sector, where confidence is now at record levels.

Price expectations are at all-time highs, while the HomeBuilder scheme, along with state and federal government initiatives, has brought forward a large chunk of demand. This has more than offset the impact from low population growth and elevated unemployment.”

“The impact of the pandemic continues to linger, though, and the outlook for the tourism sector remains clouded in an environment of repeated state border closures and delays to the vaccine rollout.”

There were 830 respondents to the online survey between 15 March and 31 March 2021. Most of the survey responses were collected before South East Queensland’s recent lockdown.

Key findings

• National confidence levels increased by 19 index points to 142 in the March 2021 quarter and is at its second highest level since the survey began. WA reached its highest confidence level on record.
• National forward work expectations increased from 31 to 53 over the March 2021 quarter.
• National staffing level expectations increased by 17 index points to 29 over the March 2021 quarter.
• National economic growth expectations increased to 38 index points, the highest level on record.
• Nationally, 64% of respondents believe the impacts of the coronavirus outbreak on their business will improve over the next 3 months, 33% of respondents believe there will be no change and 3% of respondents believe the impacts will get worse.
• 67% of respondents believed the Hotels, Tourism and Leisure sector will continue to be the most severely impacted by the Coronavirus outbreak over the next three months, followed by commercial office (17%) and then shopping centres (11%).
• Respondents from all states and territories tracked believed there will be an interest rate increase over the next 12 months.
• There are expectations that Australian house prices will increase over the next 12 months, with the national expectations index reaching a record high of 74 index points. Respondents in all markets recorded their highest expectations since the survey’s inception.
• Australian office capital growth expectations increased over the March 2021 quarter but remains in negative territory at -13 index points.
• National capital growth expectations for the next 12 months for the industrial sector increased by 14 index points and is the highest on record sitting at 41 index points. Respondents in all markets recorded their highest expectations since the survey’s inception.
• Australian retail capital growth expectations have increased over the quarter but sits at -14 index points.
• The national retirement living capital growth expectations have increased over the quarter and is now at 16 index points.
• Sentiment for Australian hotel capital growth expectations increased but remains in negative territory at -29 index points.
• Confidence in the Federal Government’s role in delivering policies that encourage jobs and economic growth has decreased over the quarter from 49 to 39 index points.
• Respondents in all markets believe their respective state governments are doing a good job planning and managing growth, with the exception of VIC and QLD.
• Prime cap rates are expected to compress over the next 12 months in all markets, with the exception of ACT and WA which are neutral.
• All state and territory secondary cap rates are expected to ease over the next 12 months.

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