What are property investors thinking?
How confident are they?
Where are they planning to buy there next property, or are they planning to site tight and ride things out?
That's what the 2018 Property Investment Professionals of Australia (PIPA) Property Investor Sentiment Survey tried to find out.
Well there were some surprises...
Australian property investors are shrugging off finance issues, concerns about taxation policy changes, and the market slowdown in Sydney and Melbourne with a growing majority believing this year is a better time to invest than last.
The national survey, which gathered insights from 820 property investors, shows that more than 77% of respondents think now is a good time to invest in property, with 52% looking to purchase a property in the next six to 12 months.
However, more investors than last year (48% in 2018 versus 43% in 2017) say that changes to investor lending policies have impacted their ability to secure finance for an investment property.
Potential changes to negative gearing and Capital Gains Tax policies are also a growing concern, the survey found, with 45% of respondents indicating they would reconsider their future investment plans as a result of proposed changes.
“The financial services crackdown on investors is having an impact on sentiment,” PIPA Chairman Peter Koulizos said
“Turmoil in government ranks that saw a change in the prime ministership has translated into increased opinion poll support for the opposition, so investors face the very real prospect of seeing tax deductions cut, and this is playing into their purchasing decisions.”
About 60% of investors say their portfolio will be positively geared within five years and 71% believe changing negative gearing and Capital Gains Tax policy will not improve housing affordability.
While a majority of investors (64%) believe it’s unfair to charge investors higher interest rates compared to owner occupiers, most (61%) also indicate they will have no problem meeting higher interest rates when their loans switch to principal and interest repayments.
- 820 survey respondents
- 77% of investors believe now is a good time to invest in property
- 52% of investors are looking to purchase in the next 6-12 months
- 48% of investors confirm changes to investor lending policies have impacted them
- 45% of investors are concerned about possible changes to negative gearing
- 90% of investors believe people who recommend property investment should be regulated and licensed
- Investors unperturbed about Sydney as they focus on Brisbane
Even though the Sydney and Melbourne market slowdown has been widely reported, most investors appear unperturbed with almost 90% indicating that concerns about price falls in our two biggest capital cities will not slow down their investment plans.
Brisbane remains the hot favourite for investment, according to the survey, with 44% believing it was the capital city with the best investment prospects (up from 43% last year).
About 26% picked Melbourne, down from 32% last year, while only 8% chose Sydney as having investment potential.
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“The affordability of Brisbane compared to Sydney and Melbourne has really come into sharp focus in the past year,” Mr Koulizos said.
“Not only are investors considering the Sunshine State capital as an investment location, a growing number are choosing to migrate to take advantage of the significant value gap as well as Queensland’s enviable lifestyle and strengthening economy.”
The number of investors looking to buy a house has remained flat at 67% – the same as in 2017, though the proportion of people looking to buy units or apartments has fallen to 6.5% from 9.3% in 2017.
About 72% of investors remain keen on opportunities to invest in metropolitan markets, while coastal locations have lost favour somewhat (down to 8% from 12% in 2017).
Meanwhile, the proportion of investors that say regional markets are the most appealing has risen to 20% from 15% in 2017.
The concept of "rentvesting” – where people rent in one location that suits their lifestyle and invest in another, often less expensive, location— is resonating, according to the survey.
A majority (63%) of survey respondents said they would consider rentvesting as a property investment strategy, while a third (36%) of this survey’s first-time investors were also renters.
“Of all respondents who purchased in the past 12 months, 20% purchased their first investment property in the past year,” Mr Koulizos said.
“Among this first-time cohort, the rise of the rentvestor is well and truly established with more than a third continuing to rent while owning an investment property elsewhere.”
The survey paints a picture of an investment community that is highly sophisticated, with investors doing a lot of planning and research before they buy.
Over 98% of property investors have some form of plan or strategy, with almost 28% having a detailed and modelled plan designed to match long-term investment goals.
However, an overwhelming majority of respondents (95%) think any provider of advice should have formal training, and almost all (90%) believe any provider of property investment advice should be regulated/licensed.
And, despite their sophistication, a large majority (87%) of survey respondents believe property investors need more education about the risks and potential benefits of investing in property.
“The survey also again highlights the need for improved professional standards and regulation of the property investment advice industry,” Mr Koulizos said
“Indeed, property investors are crying out for more rigorous standards in the real estate investment advisory sector.
“We are pleased that PIPA continues to be recognised as the peak professional association for those working in the industry as we continue to drive this agenda.”