Confidence in the Australian property industry has slumped to a five-year low as the downside to historic housing price booms in Sydney and Melbourne begins to bite, with experts saying the worst is yet to come.
Overall confidence within the property industry – one of Australia’s largest employing an estimated 1.4 million people – fell to its lowest level since September 2013, an ANZ/Property Council survey released on Thursday found.
The deflated sentiments reflect recent figures that show 2018 was the housing market’s weakest year since the global financial crisis.
Home prices slid by 4.8 per cent nationally over the past year, with new home building approvals falling by more than 18 per cent, and growing concerns over high household debt.
ANZ Head of Australian Economics David Plank described the outlook for residential housing as “particularly weak”.
“We think prices will fall through to 2020, and expect to see declines around 15-20 per cent peak to trough for Sydney and Melbourne,” Mr Plank said.
“We also think the decline in housing construction will accelerate through 2019 and 2020, as the current backlog of work is gradually completed.”
Property Council chief executive Ken Morrison said the sector would be hit by worsening availability of finance in 2019 as the fallout from the banking royal commission continues.
“One of the big engines of the Australian economy is slowing, hit by tightening access to finance, softening forward-work schedules and a less optimistic view of the economy,” Mr Morrison said.
Last week, the Australian head of flat-fee real estate disruptors Purplebricks said 2019 would see a slew of commission-charging agents closing their doors as the industry continues to contract following the end of the booms.
“I expect this pressure to continue in 2019, culminating in traditional agents lowering their commission rates, which in some cases have been extortionately high through the property boom,” Purplebricks chief executive Neil Tavender told Real Estate Business.
On Wednesday, Australian Bureau of Statistics building approvals figures revealed new-home building plunged by 18.3 per cent over the year to the end of November 2018, led by a 31 per cent fall in apartment approvals, and a 6.3 per cent fall in approvals for detached houses.
The figures show that housing activity in Australia is “collapsing”, a research note from investment firm UBS said.
“While housing activity was resilient for the first six months of 2018 (despite falling house prices and credit tightening), the weakness in the last five months … suggests new housing activity is deteriorating faster than anticipated,” UBS stated.
The ongoing decline in home prices is likely to weigh on the economy in 2019, the note said, as households tighten their belts and cut spending.
“Looking ahead, we expect growth to slow as house prices weigh on consumption,” UBS noted.