Australia's housing sector likely to contribute less to overall economic growth in 2016

The latest National Australia Bank survey data released earlier today showed that Australia's Q1 business confidence came in at 4 (prior 5, revised from 4), while conditions stood at 9 versus prior 10, conditions for next 3 months increased to 15 from 13 last.

The housing market has somewhat surprised on the upside as we move through 2016, with auction clearance rates and house prices slightly more positive than towards the end of 2015. The latest NAB confidence gauge showed both a resilient non-mining recovery and an outlook that has continued to improve, although the confidence figures matched estimates. However, the peak of earlier in 2015 has clearly passed, and confidence in the housing sector continues to decline as a result.

"Overall, today’s survey data provide further evidence that the transition in the Australian economy continues. The impetus to growth from housing construction will fade, and the decline in the mining sector continues to weigh on commercial activity in certain states." said ANZ in a report.

The outlook for commercial property remains more positive, albeit mixed across sectors and regions. Solid household spending (possibly driven by previously strong house price growth) has supported positive retail conditions in Sydney and Melbourne. However, leasing conditions remain soft in the mining states, with high vacancy rates and low yields hindering the outlook for the commercial sector.

"We anticipate the economy will continue to expand at a reasonable pace through 2016, leaving the RBA on the sidelines for an extended period.” added ANZ.