Demand not the issue for property industry as confidence holds steady

Price gains in the housing sector underpin confidence, but supply and affordability once again dominate concerns.

Rises in home price rises through the first half of the year have underpinned property industry confidence, which rose slightly in recent months despite growing concerns about the slowing economy.

The June quarter of the ANZ/ Property Council report showed a one point increase in confidence, led by South Australia and Western Australia. Expectations around housing price growth surged out of the negative into positive territory around the country on the back of six months of price gains.

Commercial property sectors fared well over the quarter. However, cost of living and rising interest pressure on household budgets could see headwinds start to appear in the industrial sector as spending begins to shift from goods to services.

Hotels could also be affected if Australians pull back on domestic travel. Forward staffing expectations fell slightly in most states, while the impact of rising rates is acting as a broadbased dampener on confidence.

Expectations around work in the development pipeline surged in WA, SA and the ACT, while Victoria rose slightly, and other states fell despite building approvals rebounding.

ANZ senior economist Adelaide Timbrell said demand was not an issue. “When you look at the forward schedules for most of the industries, whether it’s residential and most commercial, they have work to do. The issue is with ensuring you have the people to do that work and ensuring that the maths make sense for future approvals,” Ms Timbrell said.

“It takes longer, the funding costs are higher, the materials and labour costs are higher, and that does create a challenging environment. But the demand is there and that offsets some of those challenges.”

Michael Zorbas, chief executive of the Property Council of Australia.

Property Council chief executive Michael Zorbas said the industry was in the midst of a“perfect storm for uncertainty at the moment”.

“The industry is looking to government to set clear signals around supply,” he said.

Housing supply and affordability once again proved the industry’s biggest concern with the government, significantly outpacing the second-ranked issue of economic management.

It comes against the backdrop of the Albanese Government’s $10bn Housing Australia Future Fund (HAFF) stalling in the Senate last month, despite its potential to deliver 40,000 new social and key worker homes in collaboration with state and territory governments.

“We absolutely need to get our skates on, because the federal parliament, particularly the federal Senate, all parties there that are not currently supporting the HAFF, need to have a good close look at why,” Mr Zorbas said. “It’s absolutely vital that passes as quickly as possible without any other bells and whistles attached to it. In particular, anything else by way of rent capping, which is a direct impost to new housing and is, in fact, going to decrease supply if enacted anywhere and repel new investment.”