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Property sector staying positive in current environment

But inflation, skill shortages, and disrupted supply chains all having impact

Macro-economic conditions have caused a decline in confidence in Australia’s property industry, yet property companies anticipate positive forward work and workforce projections off the back of solid pipelines, according to the latest ANZ/Property Council of Australia (PCA) survey.

This positive outlook comes off the back of a Property Council survey of than 750 members which found while the overall Confidence Index dropped 19 points nationally in the June quarter, it still  remained in positive territory (118 index points) and slightly below the long term average (124 index points). A score of 100 in the Confidence Index is considered neutral.

PCA Chief Executive, Ken Morrison said despite the decline in confidence caused by larger external factors such as inflation, skill shortages, and disrupted supply chains, the sector remained positive about its own work pipelines and staffing plans.

“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,” Mr Morrison said.

“There is no doubt that 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, he said, 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.

Conducted between June 6-22, 2022, the survey showed future staffing level expectations remained positive in every state and territory over the quarter, with Victoria (31) and Western Australia (30) returning the strongest figures. A score of 0 is considered neutral.

Future work expectations also remained in positive territory, but saw declines in every market aside from WA.

The impacts of COVID also linger, with respondents in most states expecting the pandemic to further hinder business conditions.

Additionally, the survey found the virus is expected to cause the greatest impact to the commercial office sector.

Until this most recent survey, the hotels, tourism and leisure sector has consistently ranked highest in terms of COVID impacts.

“After experiencing a significant downturn at the onset of the pandemic it’s heartening that construction activity expectations in the hotel and retail sector continue their upward trend,” Mr Morrison said.

“Consistent with previous surveys, housing supply remains the most pressing critical issue for governments to solve at both the federal and state levels,” he added.

ANZ Senior Economist, Felicity Emmett said property sentiment has taken a hit on the back of two rate rises already delivered by the Reserve Bank, and the expectation of a steep increase in interest rates over the coming year.

“The prospect of sharply higher interest rates, the turn in the global outlook, and talk of a US recession have all taken their toll on the economic outlook,” Ms Emmett said.

“Firms are now the most downbeat about the economy than they’ve ever been outside of the worst of the pandemic in 2020, and are particularly negative about the availability of debt finance.

“This pessimism seems overdone given how optimistic firms are about their own work schedule and staffing levels,” she said.

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