Property industry sentiment up but economic concerns from coronavirus remain

Coronavirus hits the property industry harder than expected but confidence more broadly rose through the September quarter.

Confidence in house price growth fell through the September quarter.

The sting of coronavirus has hit the property sector harder than many industry professionals had first expected, the ANZ-Property Council Confidence survey has found.

General market sentiment rose modestly over the September quarter from the record lows felt in the June quarter, but almost all (98 per cent) of the 955 professionals surveyed reported a negative impact from the pandemic.

Noting responses were gathered ahead of the second wave in Melbourne and lockdowns that followed, the proportion of businesses reporting a slight impact from economic shocks fell from 30 per cent to 23 per cent, while the number feeling a moderate or severe impact surged from 56 per cent to 72 per cent.

Property Council chief executive Ken Morrison said despite the results being firmly negative, some glimmers of positivity were emerging.

“We were seeing a stronger perspective that people think that COVID related conditions are likely to improve and we‘ve seen the HomeBuilder stimulus have a significant impact,” Mr Morrison said.

“I think you know that is all on the positive side of the ledger. But, when it comes to economic sentiment, we see continued negativity and that is still strongly evident in expectations around employment practice and their own workbooks.”

Housing sentiment was up in most areas including construction activity, staffing and forward work, however, just over a third (35 per cent) expect prices to fall over the next year. Victorian were the most pessimistic (net balance of 44 per cent predicting falls), while 29 per cent of South Australian respondents are expecting a rise.

Broadbased impacts

ANZ senior economist Felicity Emmett said broadbased impacts from coronavirus on the economy would be likely to cause house prices to dip.

“Our view is that house prices will continue to fall over the next year or so, as the deterioration in household incomes and a sharp fall in population growth both weigh on demand. A very weak rental market will also significantly crimp investor demand,” Ms Emmett said.

On the commercial side of the property industry, confidence in the challenged office space tumbled. As many companies look to reassess the space they require in the post-COVID world, falls in forward price expectations were marked. A net balance of 71 per cent of survey respondents predicted declines.

General commercial confidence rose through the June quarter, including modest gains in the hard-hit tourism and retail sectors. Industrial property was the only sector to report a positive sentiment reading after a surge in confidence over the June quarter. Warehousing and logistics benefited through the lockdown from an increase in online shopping demand, which Ms Emmett believes is likely to continue.