- 55% of respondents believed listed equities were overvalued
- 51% predicted a fall in the S&P/ASX200 index during the 2021 financial year
- Almost two-thirds (59%) also believed that the real-estate market was overvalued
It’s no revelation to say that 2020 has provided challenges in both the professional and personal spheres.
The COVID-19 pandemic has had a dampening effect across market sectors and whole economies, although some industries remain unaffected, and others have already rebounded.
In a recent survey by Chartered Accountants ANZ, valuation professionals indicated that we haven’t turned the corner yet. More than half of the survey’s recipients believed that listed equities and property were overvalued and expected the value of the S&P/ASX 200 to fall over the next financial year.
Listed equities continue to feel downward pressure
The outlook for the sharemarket looks set to remain subdued for the remainder of the year, with 55% of valuation professionals saying listed equities were overvalued. However, around a third thought the market was about right – and 11% saw potential for growth.
Accordingly, 51% predicted a fall in the S&P/ASX200 index during the 2021 financial year, with the COVID-19 pandemic and uncertainty over underlying economic factors continuing to dampen optimism.
In fact, most respondents were factoring in further uncertainty in the year ahead. More than half (52%) predicted an increase in the volatility index, compared with a third (32%) calling a decrease.
Chartered Accountants ANZ Business Valuation Specialist and committee member, Richard Stewart, says that this result is unsurprising, given the ongoing economic uncertainty linked to the COVID-19 pandemic.
“Even before COVID-19, the market was facing some economic and cyclical headwinds,” he said. “So, it’s unsurprising that COVID and the related shutdowns have exacerbated the uncertainty in the market, which will likely result in lower values in the next year.”
Property also considered fully valued
Almost two-thirds (59%) also believed that the real-estate market was overvalued, as commercial, retail and residential values continue to face new challenges.
“People are spending less time in office buildings, dampening prospects for occupancy – although the duration of that remains to be seen,” said Richard.
While there is a risk that more people may default on home loans when stimulus measures end … many are prioritising keeping their mortgage up to date.
“Retail and hospitality property are also under pressure, with people not shopping in-store or holidaying.”
On the other hand, Richard says that – for now at least – residential property was holding up well.
“While there is a risk that more people may default on home loans when stimulus measures end, home is where the heart is – and many are prioritising keeping their mortgage up to date over other spending.”
There was some positive sentiment with other assets. Most respondents (46%) believed that bonds, agriculture and resources were correctly valued. Infrastructure was also considered ‘about right’ by almost 40% of survey respondents.
About the survey
The 2020 Valuation Practice Survey was conducted in August 2020. It includes results from more than 100 respondents working in valuation-related disciplines across the public and corporate sectors. The survey was conducted by Chartered Accountants Australia and New Zealand and distributed online to business valuation specialists.
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