Investors ready to pounce on opportunities: Survey

Written on the 7th of September 2011 by Michael Matusik - Matusik Property Insights

 

Ready, steady, go! That’s the general message we got from our recent online survey of residential property investors.

The survey confirmed the typical optimistic nature of investors, with most believing that the present market presents great buying opportunities - and in many cases, unrepeatable purchase prices.

This market appears set and ready to pounce.

Half of our respondents own between 2 and 5 investment properties and almost a third own just one. Two-thirds have no intention of selling any of their properties for at least five years, and 76% plan to buy more residential properties in the future.

Now, let’s briefly recall the property clock, with 12 representing the market peak – a vendor’s market with strong price growth, rising sales and improving yields. And six representing the market bottom – a buyer’s market with stagnant or falling prices; falling sales and uncompetitive yields.

From our survey, 72% believe that the market is poised at the bottom of that clock, between the 5 and the 7, with 25% believing we are approaching the bottom.

Reasons given for renewed interest and continued confidence in the market include:

 

• Prices are low and being discounted – half of those surveyed believe the peak buying time is now, just over a third think we are nearly there
• Low volatility, unlike shares
• Future growth opportunity in rents and prices
• Hedge against inflation
• The majority said they prefer to invest in detached houses, with only 14% leaning towards townhouses and 8% opting for apartments.
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Investors like detached product because of the potential to add value; the high land component; the opportunity for higher rents (tenants can share); and the absence of body corporate or on site management fees.

The vast majority of our respondents are looking to invest in Brisbane, with just over half preferring the middle ring (5 – 10km from the CBD) and 35% opting for an inner city suburb.

Overall, our investors prefer to invest in capital cities. Only 2% would consider a mining town.

We asked about the biggest issues facing the Australian residential market. Here are the top responses:

 

• Low affordability
• Taxes and charges on new homes
• Amount of resales on the market
• Poor rental yields
• All up, while investor sentiment appears positive, interest in residential property remains subdued.

 

What this survey confirms is that interest has been tweaked and while investors may be hesitant to act, they are most certainly watching and waiting in the wings.

No doubt, the recent sharemarket volatility has helped to shore up belief in the property market fundamentals.

What’s really needed now is a structural change to help restore confidence and entice investors to start buying again. This change involves elections – local, state and federal.

As we have seen in the past, when the confidence tide does turn, investors can be quick to act. Don’t be surprised if in the first half of next year, Queensland, at least, will see a surge in investment buying.

This report is republished with permission of Matusik Property Insights.