Property investors undeterred by finance issues

A growing majority of Australian property investors say 2018 was a better time to invest than 2017 despite the issues confronting the country’s finance sector and the market slowdown in Sydney and Melbourne, according to a new survey.

Based on the insights of 820 property investors, the 2018 Property Investment Professionals of Australia (PIPA) Property Investor Sentiment Survey shows that over 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, 48% of investors said changes in investor policies affected their ability to secure finance for an investment property. The survey also found that potential changes to negative gearing and Capital Gains Tax policies are a growing concern, with 45% of respondents open to reconsidering their future investment plans due to proposed changes.

“The financial services crackdown on investors is having an impact on sentiment,” PIPA chairman Peter Koulizos said in a statement. “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.”

According to the survey, about 60% of investors said "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 64% of investors find it unfair to charge investors higher interest rates than owner occupiers, 61% said “they will have no problem meeting higher interest rates when their loans switch to principal and interest repayments”.

Brisbane still a “hot favourite”
Despite widespread reports of market slowdown in Sydney and Melbourne, almost 90% of investors appear to remain calm, and indicate the price falls in both capital cities will not drag their investment plans.

According to the survey, Brisbane remains a “hot favourite for investment”, with 44% believing it offers the best investment prospects. About 26% chose Melbourne, and only 8% chose Sydney to have investment potential.

“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,” Koulizos said.

The number of investors looking to purchase a house remains at 67%, similar in 2017. About 72% are still keen to invest in metropolitan markets, while coastal locations have somewhat lost appeal. The number of investors who said regional markets are the most appealing rose to 20% from 15% in 2017.

Reinvesting gains popularity
According to the survey, “rentvesting”, a concept where people rent in one location that fits their lifestyle and invest in another, often cheaper, location, is “resonating”.

The majority (63%) of survey respondents said “they would consider reinvesting as a property investment strategy”, while 36% of the survey’s first-time investors rent.

“Of all respondents who purchased in the past 12 months, 20% purchased their first investment property in the past year,” Koulizos said. More than a third of all these first-timers continue to rent while having an investment property elsewhere.

Elevating professional standards
The survey depicts a highly sophisticated investment community, with investors doing a lot of planning and research before purchasing. More than 98% of property investors have some form of plan or strategy, with nearly 28% having a detailed and modelled plan designed to meet their long-term investment goals.

However, 95% of survey respondents think any advice provider should take formal training, and 90% believe anyone who provides property investment advice should be regulated/licensed. Despite their sophistication, 87% of the respondents believe property investors need to be more educated about the risks and potential benefits of property investing.

“The survey also again highlights the need for improved professional standards and regulation of the property investment advice industry,” Koulizos said.

“Indeed, property investors are crying out for more rigorous standards in the real estate investment advisory sector."