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Australian property investors remain confident about the benefits of residential real estate: PIPA survey

Australian property investors remain confident about the long-term benefits of residential real estate, shrugging off concerns about stricter lending conditions property price bubbles and oversupply, the third annual Property Investment Professionals of Australia (PIPA) Property Investor Sentiment Survey has found.

Story Highlights

  • • 742 survey respondents
  • • 70 per cent of investors believe now is a good time to invest in property
  • • 61 per cent of investors are looking to purchase in the next 6-12 months
  • • 43 per cent of investors confirm changes to investor lending policies have impacted them
  • • 75 per cent of investors are not worried about possible changes to negative gearing
  • • 90 per cent of investors believe people who recommend property investment should be regulated and licensed 

The national survey, which gathered insights from 742 property investors, shows that more than 70 per cent of respondents think now is a good time to invest in property, with 61 per cent looking to purchase a property in the next six to 12 months (up from 58 per cent last year).

However, concerns over changes to investor lending policies are looming large, with 43 per cent of respondents reporting an adverse impact in their ability to secure finance, compared to 32 per cent in 2016.

Rising rates on interest only loans were also a key concern, though the majority of investors (55 per cent) with interest only loans said they would not struggle to meet new principal and interest repayments.

As borrowing costs rise, investors are on the hunt for a better deal. More than 23 per cent said they would consider refinancing their loan for an interest rate differential of 0.5 percentage points, while another 23 per cent would consider refinancing for one percentage point.

According to the survey, only 15 per cent of investors have put their buying plans on hold due to concerns around a property price “bubble”. Similarly, investors have shrugged off speculation about negative gearing and capital gains tax changes, with only 14 per cent putting their investment plans on hold.

The survey also shows that only half (52 per cent) of property investors are currently negatively geared, with a majority (62 pe rcent) of these expecting to become positively geared within five years.

PIPA chair Ben Kingsley said that the survey results confirm that investors remain committed to property as a favourable investment option over the long-term.

“It has been an eventful time for residential property investors since we published our last survey in 2016. Similar to last year, most property investors are looking past short-term challenges and are remaining focused on the long-term wealth benefits that are available from residential real estate.

“The survey also affirms that a lot of the speculation about negative gearing misses the mark. Most investors understand that negative gearing is only a short-term cash flow position, not a property investment strategy. And only a very small minority are attracted to real estate for these tax concessions,” Mr Kingsley said.

Brisbane remains top capital city pick

Despite being the most preferred destination for property investors, Brisbane has lost some appeal, with the proportion of investors favouring it falling from 49 per cent to 43 per cent over the past year. However, the city remains far ahead of any other capital city when it comes to investor interest. After Brisbane, Melbourne is the second most popular investment destination (32 per cent), followed by Sydney (7.8 per cent), Adelaide (6.6 per cent) and Perth (5.5 per cent).

“Property investors are becoming savvier. Many of them continue to look outside of our biggest property markets of Sydney and Melbourne, which are coming close to the peak of their cycles,” said Mr Kingsley.

“The two key reasons that Brisbane still attracts investors are affordability and the potential for attractive yields. Brisbane is investing in infrastructure to make the city more liveable and investors are betting on this.”

Calls continue for regulation and improved professional standards

Although investors are becoming more sophisticated, with 33 per cent having a set strategy for investing, they overwhelmingly (84 per cent) consider that more investment education about the risks and potential benefits of investing in property is needed. Even higher numbers (90 per cent) believe that the property investment industry should be regulated and licensed in the same way as many other professionals.

“Unlike financial planning and mortgage broking, the provision of property investment advice still remains unregulated. PIPA is committed to raising the professional standards of this industry and will continue to lobby the government to regulate property investment advice and educate investors to help them make informed investment decisions,” Mr Kingsley said

September 2017 PIPA Investor Sentiment Survey Report
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