Property investors cheered by housing boom

Investor confidence has hit its stride with a range of data indicating that the only way is up.

The boost for property investors has come from a residential market with higher house prices, while the stable employment sector has given office market developers a more positive outlook.

But there are some grey clouds gathering on the horizon, including concerns about the new federal Senate and how it will affect the implementation of government policies, the long-term impact of the warm weather on retailers and the loss of jobs, particularly in the public service.

The latest Property Council/ANZ property industry confidence index to September 2014 shows property industry confidence remains steady at 131 points, compared with 132 for the previous quarter.

This comes at the same time as the Westpac/Melbourne Institute index of consumer confidence rose by 1.9 per cent to 94.9 points in July, despite being down 7.1 per cent over the past year.

The decline was attributed to concerns arising from the federal budget released in May.

Property Council of Australia acting chief executive Glenn Byres says in the report that the September quarter expectations reveal an industry confident about its future, despite low expectations for national economic growth.

”After reaching a record high of 140 points at the start of 2014, property industry confidence has moderated amid concerns around the trajectory of economic growth and the fate of the federal government’s budget in the Senate,” Mr Byres says.

In NSW, the Property Council/ANZ property industry confidence survey index sits at 143 for the September quarter (where 100 is considered neutral), thanks to the booming housing market.

Retail, office and industrial market capital growth expectations were all positive in NSW and Victoria, but flat across the other states and territories.

In Victoria, the survey index was steady at 132, up from 131 the previous three months. Fears of public service job losses meant the ACT recorded some of the lowest levels across all the survey categories.

The PCA/ANZ survey is the largest national business confidence survey. It polled about 2300 professionals from the property and construction sector in all states and territories, including more than 650 from NSW, for the forward-looking view.

Craig James, the chief economist at CommSec, said the Reserve Bank would carefully watch consumer confidence to ensure that it continues to recover and the decline in confidence driven by the federal budget does not have a lasting effect on consumer spending and home purchase/construction. Interest rates are solidly on hold.

”The global economy is in a much better position than it was 12 months ago,” Mr James said. ”Downside risks are diminishing and now the Chinese economy is showing signs of lifting after a period of malaise.”

According to Colliers International research, Australia’s strong economic growth at a time when other developed countries are experiencing recession makes the local property sector particularly attractive to many offshore and local investors.

John Marasco, Colliers International managing director of capital markets and investment services, said in the past year there has been a significant rebound in the rest of the developed world, which had led to speculation that capital may start to leave Australia and look elsewhere for opportunity.

”At present, groups leaving the Australian market are still in the minority, outweighed by the new capital entering the market,” Mr Marasco said.

”Local groups remain in acquisition mode with high levels of available funds and low costs of borrowing. An interesting trend to watch will be local and offshore groups moving up the risk curve and into either secondary CBD assets or metro office markets. Sydney and Brisbane, in particular, offer scale in metro office markets, and are already attracting interest from offshore groups.”

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