Property in ‘tug of war’ over confidence: ANZ/Property Council survey

A tug of war of confidence has emerged in the property sector as negative expectations around the economy stand at odds with internal operations.

A tug of war of confidence has emerged in the property sector as negative expectations around the economy stand at odds with internal operations.

The latest ANZ/Property Council survey found that while the overall Confidence Index increased by one point nationally in the September quarter, remaining in positive territory (119 index points), it sat slightly below the long-term average (123.7 index points).

Interest rates and construction costs were the two key drags on the metric, particularly in Queensland and South Australia. But when it comes to business operations, optimism was evident in forward work expectations and the firming up of expectations around Covid-19.

Property Council of Australia chief executive Ken Morrison said the results reveal companies had confidence in their own operations.

“We’re seeing a tug of war between looking inside the business and feeling confident looking outside the business and not feeling confident about the macro environment,” Mr Morrison said.

Further declines in home prices were anticipated by most respondents in the ANZ/Property Council survey.

“On the one hand, work pipelines and employment expectations look strong, while on the other hand interest rates, inflation, construction costs, skill shortages and recessionary fears in Europe and the US give real cause for concern,” he added.

The spectre of Covid-19 is still lingering over the commercial property sector, with respondents in most states expecting the pandemic to worsen business conditions. The virus is expected to have the greatest impact on the office segment, according to the survey, followed by the hotel, tourism and leisure sectors.

ANZ senior economist Adelaide Timbrell said the office sector was now going to have to face the increasing likelihood of a new ­hybrid normal, akin to shopping centres being forced to reposition alongside the boom of online shopping.

“When we look at the commercial property sector more broadly, we see that over the years shopping centres have had to transform from having a captive audience … to having a very optional audience,” Ms Timbrell said.

“I think we will see that transition for the office sector as well. We are seeing a bit of a shift there in terms of what an office is going to look like in that post-Covid environment and what a home is going to look like. In that post-Covid environment, that can ­create opportunities for some businesses, but it also creates huge headwinds for others.”

Future work expectations remained in positive territory but saw declines in every market aside from NSW and the ACT. The national index, sitting at 37, is slightly above the historical average of 36.8.

Further declines in home ­prices were anticipated by most ­respondents, with Western Australia the only state to forecast rises over the next 12 months.

The survey of almost 750 respondents was conducted between August 29 and September 13.

Originally published as Property in ‘tug of war’ over confidence: ANZ/Property Council survey