Here’s why our property markets will perform strongly in 2021

Property sentiment has rebounded sharply, reflecting both the lift in economic activity over the past few months, as well as stronger confidence in the outlook for next year.

Australia Property

Commenting on the findings of the latest ANZ-Property Council Survey, ANZ Senior Economist, Felicity Emmett, comments:

Falling mortgage interest rates and targeted stimulus are clearly helping to support the housing sector, where confidence is now back above pre-COVID levels.

The HomeBuilder scheme, along with state and federal government initiatives, is giving the housing construction outlook a boost, although weak population growth and elevated unemployment will be headwinds.

More broadly, government stimulus measures are underpinning the economic recovery and with that sentiment.

The survey was conducted between 16 November and 2 December and, as such, largely misses any impact of the extended HomeBuilder scheme which was announced on 29 November.

COVID-19 and its associated shutdowns have had a massive impact.

A significant proportion of that impact will be confined to the June and September quarters of 2020.

But some of the potential longer-term impacts of the pandemic are apparent in the survey.

The ongoing strength in the outlook for industrial property reflects in part the accelerated move to online sales and the associated lift in warehousing capability, while the office outlook is clearly being weighed down by the potential for a more permanent shift to work-from-home arrangements.

Yet sentiment in the property sector rose strongly in the latest survey, and is essentially back to pre-pandemic levels.

Confidence in both residential and commercial property rose, with confidence in the residential sector now at its highest level since 2015.

Property sentiment improved markedly in the December quarter survey

Property Seniment Improved Markedly In The December Quarter Survey

In the fourth round of a special set of questions related to the pandemic, the survey showed the impact from COVID-19 remains widespread, with 95% of respondents reporting a negative impact to date, although the degree of impact has changed a little.

The proportion of businesses noting a slight impact was up slightly to 24%, while the number reporting a moderate or severe impact edged down from 70% to 68%.

The number of firms reporting an impact serious enough to affect business viability nudged down from 5% to 2.6% (Figure 2).

 Impact of the pandemic on business so far

Impact Of The Pandemic On Bussiness So Far

With the pandemic well under control at present, and a vaccine set for roll-out early next year, businesses are more upbeat about COVID-19’s impact ahead.

Only 6.5% of businesses expect the impact to worsen over the coming quarter, compared with 18% in the previous survey.

 Impact of the pandemic on business over the next quarter

Impact Of The Pandemic On Business Over The Next Quarter

The turn in overall sentiment reflects both the good management of the pandemic itself, as well as a very strong monetary and fiscal policy response.

The substantial amount of stimulus in the economy has helped to drive a robust economic rebound, and that is supporting confidence.

Expectations for economic growth went from negative to positive across all states: a net balance of 17% of respondents now expect the economy to expand over the next 12 months.

This follows a net balance of 60% in the previous survey expecting the economy to contract over the coming year.

Expectations are most positive in Western Australia and Queensland (Figure 4).

 Economic growth expectations have flipped to positive

Econimic Growth Expectations Have Flipped To Positive

Source: ANZ Property Council Survey December 2020

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Kate Forbes

About

Kate Forbes is a National Director Property Strategy at Metropole. She has 15 years of investment experience in financial markets in two continents, is qualified in multiple disciplines and is also a chartered financial analyst (CFA).
Visit Metropole Melbourne


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