Market pessimism has become one of the greatest threats to a recovery of the construction sector, according to research by international property consultants Davis Langdon.

In a twist to the theory that the greatest fear is fear itself, Davis Langdon’s latest Construction Sentiment Monitor revealed that some 9% of industry players surveyed cited business sentiment as the greatest problem currently faced by the industry, a sentiment that has never been previously mentioned.

Just released results of the seventh Davis Langdon Sentiment Survey have shown that during the past three months, the Construction Sentiment Index fell 19 points to reach 51 – leaving the index at its lowest point yet.

Davis Langdon national research manager Rachel Kelloway said the term 'anxiety' had become a catch cry for participants in the latest survey.

“Participants expressed fears of an impending recession, falling business sentiment, reduced access to finance, falling forward workload and the global economic downturn as the hottest issues,” she said.

"Most businesses acknowledge that there is a real crisis of confidence with 91% of participants stating that there are problems in the industry, up 9% on last survey.

"The credit squeeze and economic slowdown featured as the greatest problem in the industry for 33% of participants – up 14 % since last survey, and 20 % during the past year.

“In a similar vein, a further 9% cited that business sentiment is now the greatest problem currently faced by the industry – a new category for this report.”

“Participants said that the inability to raise finance for projects due to the current state of the credit markets is directly affecting the feasibility of projects.

“Making its debut on this list for the first time is the Shortage of Projects, which now ranks as the second greatest problem in the industry at the moment, according to 17% of respondents.”

Obtaining finance is ranked as the number one obstacle in building development.

"In terms of sentiment, it doesn’t get any worse," said Ms Kelloway. "This issue of finance has ranked as the most serious concern of any topic we have covered since the commencement of the survey.

“But there is some light on the horizon, with participants expecting the situation to ease slightly during the next 12 months.”

Concerns about skill shortages, costs of construction and interest rate volatility have also dropped in the current economic climate. There was a general consensus that the situation will continue to ease further during the upcoming 12 months and interest rates are unlikely to pose much of an obstacle for some time.

Participants in the sentiment survey were able to identify some market segments that were expected to contribute to growth during the next 12 months.

"Health remains firmly in focus, with 90% of participants considering it the sector most likely to contribute to growth in the construction industry over the next 12 months – up 16 % on last survey,” said Ms Kelloway.

“The Civil and Resource sector also crept up, now with 77% of respondents considering it as a major contributor to growth over the upcoming 12 months – not entirely surprising given the volume of money expected to enter these sectors as a result of the Government stimulus.

“Interestingly, Restoration and Refurbishment entered the top three for the first time since the commencement of the survey, indicating to us that companies are taking the opportunity to refurbish while the market is flat, in anticipation of market recovery

“At the bottom of the rung, the three sectors that will contribute least to growth in the upcoming year are Manufacturing, Tourism and Retail.”

For further information, contact Meaghan Jones on +61 3 9933 8800 or email mjones2@davislangdon.com.au