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Risks flagged over potential fall in commercial sector

Commercial property sentiment remains “solid”, but a downturn in the commercial space could pose risks to Australia’s economy, according to an ANZ economist.

Reflecting on results of joint ANZ/Property Council research, which involved a survey of 1,000 Australian property industry professionals, ANZ’s head of Australian Economics, David Plank, noted that while residential property sentiment dropped to its lowest level since 2012, commercial property conditions remained “solid”.

The research found that, according to the ANZ/Property Council index, expectations regarding capital growth in the housing market dropped from -5 to -18.

However, despite falling, sentiment in the retail (+3 to -3), industrial (17 to 16), office (14 to 12) and hotel (13) sectors remained stable.

“The survey shows that confidence in commercial property is at solid levels,” Mr Plank said.

“Many indicators are positive, including building approvals, the large backlog of work remaining and job creation.

“But commercial property sentiment has dipped slightly, with respondents also expecting a further deterioration in credit availability in the commercial sphere.

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“Policy measures taking some heat out of the housing market are in many ways a positive development, but potential spillover effects onto commercial property could have a negative impact on Australia’s economy.”

The ANZ/Property Council Survey also found that confidence in debt finance availability among property industry professionals slipped deeper into negative territory, from -18 to -24.

The report noted that expectations over debt finance availability were weakest in Victoria (-30), followed by NSW (-28), Queensland (-24), the ACT (-19), South Australia (-15) and Western Australia (-13).

National economic growth expectations slipped into negative territory, from 8 to -3.  

The survey also reported a sharp increase in expectations of an interest rate rise, from 12 to 25.

[Related: NSW property market confidence lowest in the nation]

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