This article is from the Australian Property Journal archive
CONFIDENCE remains strained by ongoing economic uncertainty, despite a mild improvement to the NAB Commercial Property Index in the first quarter.
According to NAB’s Quarterly Australian Commercial Property Survey Q1 2023, the index was up from -9 pts to -6 pts, which is well below the +11 pts reported in the same period last year and below the long-term average of -1 pt.
The retail and office sectors were weighing down the overall sentiment amidst uncertainty and reduced spending, despite improvements to both market sentiments.
The retail index saw a marginal increase over the quarter from -37 pts to -32 pts, with the office index still weak but seeing a more significant improvement from -27 pts to -16 pts.
The CBD hotels sector sentiment was stable over the quarter and was highest of any market at +33 pts, with property professionals reporting positive capital and RevPAR growth during the quarter.
While the industrial property index dropped to its lowest level in more than 2 years at +32 pts, from +44 pts in the previous quarter, it is still holding well above the survey average of +9 pts.
“Economic uncertainty remains elevated. How quickly inflation moderates is a key unknown as domestic pressures – including wage and rents growth – continue to build,” read the report, authored by Alan Oster, group chief economist at NAB.
“On the other hand, the full impact of the rapid tightening in monetary policy is yet to be seen, and there is a risk that activity could slow more sharply than expected.”
For the next 12 months, commercial property confidence remains negative, at -2 pts, with the two-year measure stable and well below average at +12 pts.
Confidence is also strongest for CBD hotels for the next 12 months, at +33 pts, followed by industrial property at +32 pts, despite downgrades from projects from Q4 2022.
While confidence remains in the negative for office and retail at -11 pts and -23 pts respectively.
By state and territories, market sentiment is negative across the board excluding SA/NT, which rose to +3 pts from 0 pts in the previous quarter.
Victoria remained at the lowest level by a significant margin, at -28 pts, with NSW following at -12 pts, Queensland at -4 pts and WA at -2 pts.
The survey also revealed that just one in three property developers plan to start new building works in the next six months, which is well below the average. With more property professionals reporting harder funding conditions in both debt in equity over the quarter.
Development intentions have dropped off in line with a slow-down in new construction and building approvals, with just 37% of developers intending to commence new development works in the next 6-18 months.
With the number of developers unsure of their intentions hitting the highest level of uncertainty since mid-2020, rising to 15%.
Overall, just 69% of developers plan to commence new building works in the next 18 months, down from 75% in the last quarter and 80% at the same time last year. All of which is below the survey average of 84%.
