Rising interest rates and continuing supply chain issues drive the drop
Confidence in the property market has plummeted, driven by pressures including rapidly rising interest rates and continuing supply chain issues, according to the quarterly ANZ/Property Council of Australia survey.
The survey found that overall confidence fell 19 index points nationally in June, according to The Australian.
While the final reading was still positive at 118 index points, it fell below the long-term average of 124 points. The largest drops were in New South Wales (26 points), Queensland (21 points), and South Australia (21 points).
Property Council of Australia chief executive Ken Morrison said the drop in confidence was largely driven by factors like inflation, skill shortages and disrupted supply chains.
“What we’re seeing in this survey is a steep confidence dip in the broader outlook, yet specific firms remaining optimistic about their own business conditions,” Morrison told The Australian. “There is no doubt the lingering effects of COVID, inflationary pressures and interest rate implications, energy and staffing shortages, as well as global geopolitical issues, have left a dent in confidence, and that comes as little surprise. However, when asked to reflect on their own business plans, respondents felt well-positioned to withstand those headwinds – which is why, combined with historic low unemployment figures, confidence overall is still in positive territory.”
Capital growth expectations over the coming year came back across all sectors, The Australian reported. Industrial expectations halved nationally, although still remaining in positive territory. Office expectations dipped into the negative (around -15 points).
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House price growth dipped into the negative for the first time in more than a year, led by NSW and Victoria.
Interest rates rose another 50 basis points in July, marking three straight months of rate hikes by the Reserve Bank, with expectations about access to credit plummeting across the board and landing firmly in the negative (around 25 index points).
ANZ senior economist Felicity Emmett told The Australian that the rapid change in expectations about inflation and the rate increases between the March and June quarters may have heavily influenced the results of the survey.
“There’s a massive rise in expectations around the cash rate through that period, and obviously, in a sector like property that’s heavily leveraged, interest rates really matter,” Emmett said. “The key issues there are interest rates, but also the problems the construction sector is having.”
