The warnings come in the September 2017 ANZ-Property Council Survey, which canvassed more than 1,700 respondents (including developers, agents, consultants and government) on their views on property, business and the economy as a whole.
The data shows that sentiment in the housing market has declined noticeably, with respondents in each state demonstrating a strong belief that the availability of debt finance over the next 12 months will be harder to access, cementing a downward trend in sentiment.
Respondents were most pessimistic in NSW and Victoria, as well as in ACT. Those in South Australia were the least worried about accessing debt finance in the next year.
Glenn Byres, chief of policy and housing at the Property Council of Australia, commented: “While national confidence is at elevated levels, the fall in confidence in our two biggest state economies of NSW and Victoria is a red flag that needs to be watched.
“In part, we are seeing the impact of debt finance tightening as well as an expectation that capital growth in the housing market will flatline.”
Daniel Gradwell, ANZ’s economist agreed that the decreased sentiment is attributable to APRA’s regulation and tighter lending requirements.
He said: “The additional regulation is resulting in an ongoing worsening of the availability of debt finance.
“While tighter funding conditions are being reported across all sectors of the property market, the impact has been most pronounced in the residential sector.”
The survey found that the outlook for the housing market is softening, noting that Sydney house price growth slowed to 12 per cent in May (year-on-year), from 20 per cent just two months earlier. Similarly, monthly building approvals have fallen around 15 per cent from the peak a year ago.
According to the data, only 37 per cent of respondents expect prices to rise over the next 12 months, and 31 per cent expect construction activity to rise, down from 49 per cent and 38 per cent respectively three months ago.
Similarly, only 10 per cent of respondents believed that retail property values will rise over the next 12 months, down significantly from 44 per cent a year ago.
While ANZ said it believed the housing market will cool through 2017 and 2018, it argued that the drop in sentiment “does not ring alarm bells” given that sentiment across most regions remains higher than it was a year ago.
For example, confidence in Western Australia was around the highest levels in three years, while Queensland’s recovery from its lows of 2016 continues.
However, the ANZ economist concluded: “This continued low growth/low inflation environment presents a significant policy challenge for the RBA and government given the starting point of a low cash rate, fiscal deficits and high household debt.
“For monetary policy, we think our forecast of growth muddling through and inflation very slowly recovering will keep the RBA on hold for some time.”
[Related: Investor lending slowdown continues]
Annie Kane is the editor of Mortgage Business.
As well as writing news and features on the Australian mortgage market, financial regulation, fintechs and the wider lending market – Annie is also a regular contributor to the Mortgage Business Uncut podcast.
Before joining Momentum Media in 2016, Annie wrote for a range of business and consumer titles, including The Guardian (Australia), BBC Music Magazine, Elle (Australia), BBC Countryfile, BBC Homes & Antiques, and Resource magazine.