A robust growth outlook in the residential sector has paved the way for a stronger property industry confidence in New South Wales, but issues surrounding planning reforms, taxes, and fees still remain, according to the latest ANZ/Property Council Survey.

Over the past six months, the property industry reported a stronger outlook than during the first half of 2019, which was affected by the political uncertainty and changes in the banking sector.

According to the study, the improved residential market outlook and the major investment into the economy through large infrastructure projects have contributed to the appeal of the state as a property hotspot.

"The growth of some confidence in the residential market is a positive sign for the state economy, and with better growth expectations across this sector and better availability of finance for housing, we hope to see continued growth in confidence," said Jane Fitzgerald, Property Council executive director for NSW.

Fitzgerald said the recent announcement of the state government regarding planning reforms will remain a major concern this year.

"Planning reform and the impact of the existing regime of property fees, taxes and charges across local and state government are still critical issues for the property industry," she said.

Interestingly, of all indexes included in the study, the state government performance is the only one to report a decline in confidence for the quarter. The overall confidence in the state government remained neutral.

"We must continue to be vigilant — we need a better planning system that will provide greater certainty for the community and industry to enable our state to grow well, while supporting investment and better productivity, more jobs and more affordable housing," Fitzgerald said.

The weakening growth in house approvals is one of the major issues facing the state. While recent figures show a substantial monthly increase in building approvals in the state, the underlying trends are already worrying.

According to the Greater Sydney Commission, to reach the new housing target of 36,000 housing completions each year, over 60,000 approvals should be recorded. Over the past 12 months, however, the state only recorded 50,000 approvals.

Urban Taskforce CEO Tom Forrest said the planning system is to blame here.

"Developers have land ready to create thousands of new homes in Western, North Western and South Western Sydney as well as urban renewal opportunities. This is alarming news for the NSW Treasury. What is clear now is that this requires more than cosmetic change. Something needs to be done to clear the backlog and significantly reduce the timeframes for having development applications approved," he said.