Concerns about the NSW planning system along with turbulence in international and national economic markets is keeping a cap on confidence in the state’s property sector, a new survey has revealed.

The Property Council of Australia and ANZ have released the findings of their inaugural Property Industry Confidence Survey, taken in September and involving 1240 participants.

According to ANZ’s Chief Economist Warren Hogan, NSW’s confidence compared with other states reflected tightening commercial and residential fundamentals.

NSW Executive Director of the Property Council Glenn Byres said the survey pointed to a need to unlock the potential for growth in investment.

“Confidence across the property sector in NSW remains sensitive to the state of international and domestic conditions,” Mr Byres said.

“There is some upside compared to interstate competitors, but the sector thinks the construction cycle for commercial office, industrial, retail and residential property is still moving into second gear.

“The challenge for NSW is to respond with policy solutions that turbo charge investment and deliver a new wave of growth.”

Despite NSW ranking third in the nation on the Property Industry Confidence Index, comparing states and territories on a benchmark where 100 means ‘neutral’ sentiment, local policy issues were constraining investment confidence.

The survey also drew out local factors affecting the industry, with the planning system seen as the biggest barrier to investment in NSW, Mr Byres said.

“Concerns about general business confidence and access to debt finance topped the list, but planning legislation was the major local factor at play,” Mr Byres said.

“It highlights the urgency and stakes involved in the review of the State’s planning and development assessment systems.

“NSW needs to re-boot the planning system to make it more responsive to investment through a simpler and more efficient set of rules – as well as cultural reform.

"The property sector is critical to our economic prosperity as it drives 10 percent of the State’s wealth and employs more people than any other industry."

“At 106.8, the Property Council/ANZ confidence index reveals a relatively positive view of NSW property,” said Warren Hogan, ANZ’s Chief Economist.

“Upbeat perceptions of NSW property are being underpinned by tightening fundamentals in both residential and commercial markets.

“Insufficient home building has seen the NSW housing market balance deteriorate sharply in recent years.

This is reflected in near-record low rental vacancies in Sydney and a sharp acceleration of rents. After languishing for many years, the survey suggests Sydney’s housing markets have the opportunity to move to a period of outperformance.

“The NSW commercial property market is also well placed with tight vacancies across most sectors and limited new supply.”