The ANZ/Property Council Survey, which recorded the overall confidence levels of property industry stakeholders, has taken a dive of 61 index points quarter-on-quarter to a new record low of 62.
The survey was conducted on 981 property industry professionals and stakeholders, between 16 March and 31 March 2020, to record the industry’s confidence levels for the upcoming June 2020 quarter.
The drop in overall industry sentiment was driven largely by concerns in the housing market, a pivotal sector in the Australian economy, as well as ongoing difficulties in Australian businesses, lower employment expectations and a slowdown in construction.
Property market expectations had been steadily growing over the second half of 2019, and the market started off 2020 in a strong position. However, according to the survey, sentiment levels have fallen below zero for the first time since early 2019.
Sentiment towards residential property prices recorded a 58-point drop between the March and June 2020 quarters, from 35 to -23, with confidence levels falling across all local Australian markets.
Further, all markets appeared to believe that it will become more difficult to obtain finance over the next 12 months, with the exception of the ACT, which recorded neutral expectations for finance, while expectations for the number of residential apartment pre-sales over the June quarter fell across all states and territories.
The survey suggests that the construction sector, which has faced a more drawn-out downturn than that of the housing market, and is yet to see a meaningful recovery, is also due to take a hit amid COVID-19.
According to the survey, two-thirds of respondents reported that current project construction schedules are being “moderately” impacted by the pandemic, while 15 per cent noted a “serious” impact on current construction schedules over the June quarter.
More broadly, around two-thirds of survey respondents stated that the COVID-19 pandemic was already impacting their businesses, while 35 per cent reported a “serious” impact.
Further, 85 per cent of respondents expect the economic impact of the virus to worsen over the June quarter, with over half of respondents anticipating the economic impact on their businesses to be “serious”.
Employment expectation figures indexes tracked down below zero for the first time since the survey began, while economic growth expectations reached their lowest point on record, according to the Property Council of Australia (PCA).
PCA chief executive Ken Morrison stated that the results are “troubling”, considering the importance of the property industry in the Australian economy.
“Property is a big driver of employment and economic activity, and the plunge in expectations for these key drivers highlights the critical importance of government action that supports the industry now and into the future,” he said.
“No sector of the economy is being spared from the impact of COVID-19, but property is the nation’s biggest employer and contributes more than 13 per cent of GDP.
“This means the property industry needs to be front and centre for policymakers as they manage and plan the economic and policy response to the pandemic.”
Mr Morrison continued: “This includes the importance of keeping construction sites open now and stimulus measures to support businesses, as well the longer-run impacts from the pandemic that may play out for many months once the public health crisis has passed.
“It will be important for policymakers to monitor the impacts on rental income, development activity and capital markets on the property sector,” Mr Morrison concluded.
ANZ senior economist Felicity Emmett commented: “After recovering through much of 2019, property sentiment has taken a sharp hit from the coronavirus and the shutdown measures put in place by federal and state governments to contain it.”
She noted that the deterioration of sentiment levels has been spread across sectors, as the economic fallout from the COVID-19 pandemic hits.
“Across all sectors, price expectations have turned around sharply, employment prospects have deteriorated and the construction outlook has turned down.
According to Ms Emmett, while there is no shutdown being imposed on the construction sector, the apparent downturn in the industry is “concerning”.
“[It] suggests that the impact of the virus may be more long-lasting on the property sector,” she said.
Ms Emmett concluded: “With long lags associated with construction approvals, commencements and completions, a quick rebound once the lockdown is eased seems unlikely.”
[Related: Economy to yoyo out of recession: IMF]
Hannah Dowling is a journalist for mortgage business, the leading source of news, opinion and strategy for professionals working in the mortgage industry.
Prior to joining the team at Mortgage Business, Hannah worked as a content producer for a podcast catering to property investors. She also spent 6 years working in the real estate sector at a local agency.
Hannah graduated from Macquarie University with a Bachelor of Media and Journalism.