Despite tightened lending conditions, the prospect of price bubbles, and pockets of oversupply, Australia’s property investors remain bullish about the long-term benefits of residential real estate, according to the Property Investment Professionals of Australia’s (PIPA) Annual Investor Sentiment Survey 2017.
The national survey, which gathered insights from 742 investors, indicated that the majority of investors (70%) believe now is a good time to invest in residential property. Meanwhile, 61% are looking to purchase a property in the next six to 12 months (up from 58% in 2016).
However, concerns over ongoing changes to investor lending policies are dampening prospects, with 43% of respondents reporting an adverse impact in their ability to secure finance, compared to 32% last year.
Rising interest rates on interest-only loans are also a key concern, though more than half (55%) of investors with interest-only loans said they would not struggle to meet new principal-and-interest repayments.
Slightly more than half (52%) of respondents are currently negatively geared, with the majority (62%) of these expecting to become positively geared within five years.
“It has been an eventful time for residential property investors since we published our last survey in 2016,” said Ben Kingsley, chair of PIPA. “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.”
Brisbane remains the top pick among investors
The proportion of investors who see Brisbane as the state capital with the best investment prospects has declined from 49% to 43% over the past year. However, the Queensland capital remains far ahead of any other capital when it comes to investor interest.
The second most popular investment destination is Melbourne (32%), followed by Sydney (7.8%), Adelaide (6.6%), and Perth (5.5%).
“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,” Kingsley said.
However, with reports about the current oversupply of apartments in Brisbane and the resulting softening prices, some investors are wondering if risks are growing for those considering this segment of the market.
According to Kingsley, Brisbane remains a sound investment option for investors, given its affordability, solid yields, and strong economic fundamentals.
“Parts of inner Brisbane are experiencing a short term period of over-supply of new units at present, but this is expected to be absorbed over the medium term due to demand from investors, owner occupiers, and first homebuyers,” he told Your Investment Property.
“Brisbane offers a plethora of options for investors given its affordable house prices. In fact, there are still middle-ring suburbs which boast median house prices of $500,000 or less in the Brisbane CityCouncil area.
“The price differential between the Sunshine State capital and Sydney and Melbourne is why Brisbane is firmly on the radar of interstate investors.”
Michael Mata, Your Investment, 20 November 2017