The latest ANZ-Property Council of Australia (PCA) survey showed drastic weakening of sentiments among Australian property professionals due to the negative outlook towards the home market.
The drop was a major pullback from record highs in the preceding quarter and was applicable for almost all the states with sentiment only improving in Queensland and South Australia from the past three months, Business Insider Australia reported
“The fall in sentiment is entirely due to the residential segment. In a sharp reversal from the stabilisation of previous quarters, the outlook for capital values in residential property has deteriorated markedly,” said David Plank, Head of Australian Economics at ANZ Bank.
“Staffing levels, construction activity and the forward work schedule are all expected to ease in the residential space,” he added.
In previous month, house prices across the country have been declining, driven by rollbacks in Melbourne and Sydney. This reflects slowdowns in the auction market, new home sales and housing credit growth.
Plank pointed out that anticipations for home prices significantly deflated in the recent survey, a glaring shift when compared to results from 2017.
“New South Wales and Victoria are leading this shift in sentiment, with a net 37% and 24% of respondents respectively expecting prices to fall over the next 12 months. This reflects a sharp turnaround from the net 20% who expected prices to rise this time last year,” he said.
“It is understandable that respondents expect New South Wales and Victoria to experience the sharpest declines, given that those housing markets have had the strongest growth in recent years.”
In addition, New South Wales and Victoria households were seen to have the most leverage. Hence, they are more likely to experience tightening measures.
On the bright side, Plank shared that the public can expect a more robust outlook in Queensland and Western Australia.
“Queensland is experiencing accelerating population growth, which should support the housing sector, while Western Australia is close to the end of the downturn in mining investment,” he said.
But he still warned that survey respondents were pessimistic regarding the outlook for residential construction, with sentiments dipping to its lowest level in six years although still in the positive territory.
With the expected residential construction decline in the picture, Plank emphasised that Australia’s thriving residential building could also weaken significantly in the coming months.
“We believe that building approvals are already moving past their peak,” Plank says. “And we expect to see housing starts fall around 10% over the coming year.”
“The tightening in credit availability and the associated weakening of the residential housing market do increase the economy’s vulnerability to additional shocks,” Plank concluded.
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