Expectations on the availability of credit for buying property are the worst they have been since 2011 with more than twice the number of Australia’s property industry professionals expecting interest rates to rise and house prices as well as shopping centre values to fall over the next 12 months.
Expectations around growth in the commercial property sector have also softened, sounding alarm bells. Forward work schedules and staffing level expectations have also both fallen in parallel for the first time with staffing expectations recording their largest quarterly drop since 2011.
The ANZ-Property Council of Australia survey, which includes almost 1000 respondents across the industry, reveals that the number of people across Australia expecting interest rates to increase has more than doubled since the last survey three months ago, while those who expect credit availability to worsen is at its highest point since the survey started in 2011.
ANZ senior economist Daniel Gradwell said further consequences of tighter comprehensive credit reporting were still to play out in the property market.
“We know these factors are going to come into play – the banks are still wanting to lend but much more cautious about who to,” he said.
As these tighter financing arrangements play out, demand for both residential property and retail property such as shopping centres would continue to soften.
More than double the number of people than three months ago now think there will be further worsening in house price growth.
Even in retail property there has been a sharp deterioration in expectations around capital growth.
“This shift in sentiment needs to be on the radar of policymakers because now more than ever we need strong investment, tax and planning regimes to keep the economy strong,” Property Council of Australia chief executive Ken Morrison said.
While still positive, the level of growth expectations in office and industrial property has also fallen, sounding alarm bells for ANZ.
“The downturn in the housing outlook is significant, although not surprising. But the second consecutive fall in the commercial property space is something we will be watching,” ANZ’s head of Australian economics, David Plank, said.
The survey’s release comes as Morgan Stanley revealed that tighter credit and overbuilding had worsened its house outlook on property prices.
“We now see a longer -10 to -15 per cent correction (compared to previous -5 to -10 per cent, the deepest since the early 1980s,” Morgan Stanley said in a note to clients.
“We struggle to see improvement in any of our components over the next year, with pre-existing headwinds of net supply, an RBA on hold and sustained focus on lending standards, all independent of potential negative gearing/capital gains tax changes.”
The PCA survey also found that expectations around national economic growth had fallen into negative territory for the first time in three years, dropping by 12 index points to -3.