The number of developers kicking off new projects over the next six months is stalling as confidence in commercial property dips to new lows.
NAB’s quarterly commercial property index has registered its first negative reading in more than four years, led by a very weak retail sector.
The quarterly index, which measures confidence in the office, retail industrial and CBD hotels sectors, fell 11 points to a -2 — with sentiment toward the retail sector taking a 26 point hit to -44, while CBD hotels fell 13 points to -13.
The bank also releases a quarterly residential property index.
The slump in development starts reinforced the view that residential building activity had passed its peak, NAB chief economist Alan Oster said.
“We continue to suspect that challenging funding conditions are making it harder to get new projects up and running, resulting in the shelving or delaying of some projects,” Oster said.
Among developers planning to commence new works, the number targeting residential development projects increased to 51 per cent in the first quarter — from 48 per cent in the fourth quarter — but still remained well below the long term average.
The survey provides a more positive long term forecast for new starts, with the number of developers who said they expected to begin new projects in the next 18 months rising to 19 per cent from 10 per cent in the fourth quarter.
Just 22 per cent of developers surveyed said that they planned to start new projects in the next six to 12 months.
By sector, office and industrial property market sentiment is also marginally softer, but continues to track well above long-term averages.
Oster said the CBD hotels sector experienced its first negative reading since mid-2016, while retail confidence was “deeply negative”.
“This will have been influenced by the slowing economic growth momentum into the March quarter, with the situation in discretionary retail and consumption more generally deteriorating even further,” Oster said.
Victorian property professionals are the most confident about commercial property over the next year, while NSW confidence levels slipped into negative territory for the first time since the survey began.