Despite talk of property price bubbles, tightening investor lending policies and ongoing debate about the future of negative gearing, Australian property investors remain optimistic about the long-term merits of residential real estate according to a new survey.
The second annual Property Investment Professionals of Australia (PIPA) Property Investor Sentiment Survey gathered insights from more than 1000 property investors.
PIPA chair Ben Kingsley says the survey results confirm that property investors remain focused on the long-term benefits of property investment.
â€œSimilar to last year, most property investors are looking past short-term challenges, remaining focused on the long-term wealth benefits that are available from residential real estate, including the potential for capital growth and rental income,â€ he says.
â€œImportantly, most investors are not speculating on quick gains in a low interest rate environment.
â€œThe survey also affirms that a lot of the discussion 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.â€
While 32 per cent of investors say that recent changes to lendersâ€™ investment policies have affected their ability to secure finance, 58 per cent are nonetheless looking to buy a property in the next six to 12 months.
According to the survey, 72 per cent of investors arenâ€™t worried about the potential removal of negative gearing and only 2 per cent think that the currently available negative gearing concessions are the key attraction of real estate investment.
The survey shows that almost half (47 per cent) of property investors are positively geared and a majority (63 per cent) of investors who are currently negatively geared expect they will become positively geared within five years.
Brisbane remains a preferred destination The number of investors who believe Brisbane offers the best investment prospects has fallen slightly â€“ from 58 per cent to 50 per cent over the last year â€“ but the city remains far ahead of any other capital cities (Melbourne 20 per cent, Sydney 11 per cent, Adelaide 9 per cent and Perth 4 per cent).
â€œThe two key reasons that Brisbane still attracts investors, in spite of concerns around oversupply, are affordability and the potential for attractive yields. Brisbane is investing in infrastructure to make the city more liveable and investors are clued on to this,â€ Kingsley says.
Brokers highly valued by investors Mortgage brokers remain by far the most important source of finance for property investors, with 65 per cent of investors (66 per cent in 2015) securing their last investment loan through a broker. Some 71 per cent plan on securing their next investment loan through a broker.
â€œIn the complex borrowing environment we are now facing, brokers continue to play a key role as providers of finance to investors. They tend to better understand the investment lending landscape and offer great choice to investors,â€ Kingsley says.
The survey also shows that a vast majority (80 per cent) of investors would choose or refinance to a lender offering the option of an interest-only repayment period, as opposed to a lender who did not offer such a period.
Sixty-six per cent of investors would choose or refinance to a lender if it offered the same interest rates for investors as owner-occupiers.
More regulation and improved standards needed Although investors are becoming more sophisticated, with 31 per cent having a set strategy for investing, they overwhelmingly (87 per cent) consider that more investment education about the risks and potential benefits of investing in property is needed.
Even higher numbers (89 per cent) believe the property investment industry should be regulated and licensed in the same way as many other professions.
â€œUnlike financial planning and mortgage broking, the provision of property investment advice still remains unregulated,â€ Kingsley says.
â€œPIPA 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.â€
PIPAâ€™s 2016 Property Investor Sentiment Survey â€“ Key stats at a glance
Â· 1004 survey respondents
Â· 71% of investors believe now is a good time to invest in property
Â· 58% of investors are looking to purchase in the next six to 12 months
Â· 72% of investors are not worried about possible changes to negative gearing
Â· 32% of investors say changes to lendersâ€™ policies have affected them
Â· 65% of property investors secured finance for their last deal via a mortgage broker
Â· 89% of investors believe people who recommend property investment should be regulated
15 September 2016
Australian Property Investor: