You wouldn’t believe what property investors are planning to do in 2023

How have rising inflation and rising interest rates affected you?

Have you had to change your lifestyle, have you sold a property, or are you considering selling because of rising interest rates?

And have the current economic conditions changed your strategy or approach to property investing?

These are some of the questions we recently asked 1,906 Australian property investors and would-be investors in our annual Property Investment Sentiment Survey conducted together with Finder.com.au, and some of the answers were enlightening.

Running since 2011, our survey offers rich and vibrant insights into how property consumer trends and sentiments have changed over time.

A surprising result is that almost 1 in 3 (31%) of those who owned an investment property sold at least one property in the last year, and around 32% of property investors are considering selling a property in the next year or two.

Yet despite the continual barrage of negative media 57.5% believe this a still a good time to invest (down from 74% last year.)

38% are planning to buy an investment property (down from 50% last year) and 21% are hoping to buy a new home in 2023 (down from 24% last year.)

You can download the full survey findings by clicking here, but for the moment let’s look at some of the highlights of this year's Sentiment Survey.

Do you believe now is a good time to invest in residential property?

Respondents were concerned about the current economic conditions and only 57.2% thought it was a good time to invest in property.

This is significantly down from last year when 74% of respondents thought it was a good time to invest. But remember our property markets were booming back then meaning last year’s respondents saw conditions as the best time to invest in property for a long time.

We have to go back to 2018 (52%) and 2017 (59%) to find such a low percentage of respondents feeling positive about our housing markets.

This year only 38% of respondents said they were planning to buy an investment property in the next year (down from 50% in 2021 and 42% in 2020.)

However, investors are cautious about our property markets.

• Only 12.7% of respondents see property values rising in the next year.
• Last year 45% of the survey saw the next year (2022) as a year of rising property values and they were wrong, while in 2020 61% of respondents thought property values would rise the following year.

The biggest stumbling blocks to purchasing another investment property were not having enough deposit (25.1%) and difficulty servicing loans (24.6%) and not surprisingly 39% of responders felt that rising interest rates had impacted their ability to purchase another property

Have you sold an investment property in the last 2 years?

Almost 1 in 3 (31%) of those who owned an investment property sold at least one property in the last year, and around 32% of property investors are considering selling a property in the next year or two.

It seems that around two-thirds of these properties were sold to owner-occupiers, meaning the “pool” of rental properties available has been significantly diminished and this has only exacerbated the current rental crisis.

And to make things worse for tenants, considering around 32% of those who own investment property are thinking about selling in the next year or two, this means the number of properties available to rent will fall even further.

How has inflation affected household finances?

Surprisingly 48% of respondents felt there was no real change to the household financial situation at present, but unfortunately, 34% found their financial situation had worsened with 12.7% having to cut back on groceries and 9.7% cancelling a holiday this year.

Has rising inflation or higher interest rates changed your strategy or approach to property investing?

While 34.8% were more cautious, 43.6% of respondents have not changed their approach and that makes sense as property investment is a long-term play.

In fact, 37.9% of the respondents were planning to buy an investment property in the next 12 months, but not surprisingly, this was down from the long-term high of 50% last year.

These investors saw the best potential for capital growth over the next 5 years in Brisbane (36%), Melbourne (28.6%), Regional Australia (22.9%), and Sydney (22­­.1%)

What type of property are you planning to buy?

Clearly off plan properties are out of favour with respondents keen to buy established properties, and in particular properties with the ability to add value through renovation or development.

The Bottom Line

The fact that respondents to this survey already subscribed to Property Update or Finder.com.au meant they were an audience of people already interested in property.

When asked for their combined family income 5% earned less than $50,000 while 30% earned more than $200,000 but the bulk earned a combined family income between $100,000 and $200,000.

88% owned at least one investment property, but a wide spectrum of investors partook in the survey:

• 32.4% owned no investments
• 21.2% owned one investment property
• 15.1% owned two investment properties
• 10.8% owned three investment properties, and it went all the way up to
• 3.1% owning 10 or more properties

And clearly, these investors took a long-term view with 45.1% investing in long-term capital growth rather than cash flow and many are looking for a property that has the potential to add value, rather than waiting for the market to do the heavy lifting.

There is no doubt that our housing markets are experiencing headwinds, and property investors will continue to experience a number of hurdles with the economic challenges facing Australia, yet few have changed their long-term plans.

About Michael Yardney Michael is a director of Metropole Property Strategists who help their clients grow, protect and pass on their wealth through independent, unbiased property advice and advocacy. He's once again been voted Australia's leading property investment adviser and one of Australia's 50 most influential Thought Leaders. His opinions are regularly featured in the media.