For the first time in 18 months, investors are now optimistic about house price growth, driven by the green shoots manifesting in the market, according to the latest ANZ/Property Council Survey.
Emerging signs of recovery are fuelling the investors’ positive sentiments, said ANZ senior economist Felicity Emmet.
"Since the auction clearance rates have picked up sharply, prices have been rising strongly now in Sydney and Melbourne for two months, and housing finance is starting to pick up. Interest rate cuts and regulatory easing have been key drivers of this turnaround," she said.
Emmet said that the continued improvement in credit availability could indicate that construction would also pick up in the coming months.
"Prices are clearly benefitting from the combination of some pent-up demand and low levels of stock, but we continue to think that the current period of strong monthly prices gains will be relatively short-lived and that prices will moderate in coming months as more supply comes on stream and credit policies remain relatively constrained," she said.
Weak overall sentiments
Despite the strong showing in the residential property segment, overall sentiment has retreated from its post-federal election bounce to below the historical average, dragged by economic concerns.
"Growing concerns about national economic growth are weighing on sentiment in the property industry, with a sharp drop in sentiment over the last quarter. With the property industry accounting for 13% t of GDP and housing construction falling sharply, this is a significant shift," said Ken Morrison, chief executive at the Property Council of Australia.
He said the underwhelming sentiments could indicate the need for reforms from the federal and state governments that focus on boosting investment in the property sector.
"There are productivity levers that can be used especially at the state and territory level which can smooth out the cyclical nature of the residential property market and ensure that our growing population's needs for housing are adequately met along with other infrastructure and services," he said.
Aside from the weak outlook for housing construction, investors are also not optimistic about the commercial property market. Emmet said the decline in sentiment in the commercial property sector, while not sharp, continues the downward trend evident since mid-2018.
"Marked weakness in retail is clearly weighing on the overall commercial sector, while concerns over land tax reform appear to have dampened sentiment in South Australia," she said.
Morrison said South Australia's risky changes to land tax for property owners and investors have led to precipitous drops in sentiment across the board in just one quarter — a massive own goal for a state which had been leading the way on sentiment and confidence in recent surveys.
"There's a clear message for all Australian governments – confidence is hard-won, and easily lost through poorly conceived, ad hoc or prejudicial policy changes," he said.