Property investors are confident about the market in the year ahead despite the recent natural disasters, with 64% saying they intend to purchase a new home this year and are targeting Melbourne and Sydney.
But the latest Metropole Property Strategists survey of over 2,700 investors also found that more than half believe there will be either little or no growth in capital gains this year, suggesting they have a long-term outlook on returns.
Metropole chief executive and SmartCompany blogger Michael Yardney says the results suggest investors are realistic about the market, and are keen to pick up opportunities when they can, while buyers have the upper hand.
“When you look at the numbers, most don’t expect property prices to go up. More than half believe it will only go up at the most by 5% or so,” he says.
“They aren’t investing because they believe there will be capital growth over the next year or so… they are looking long-term and are identifying opportunities. It’s definitely a buyer’s market.”
The survey’s respondents identified Melbourne and Sydney as the best areas for capital growth, with 26% believing Melbourne see the best growth over the next five years, while 25% said Sydney would deliver the best returns.
“It’s important to remember this survey was taken at the end of February, after the natural disasters. And the results vary from state to state.”
In fact, the best results were found in the Northern Territory – an impressive 76.5% of those surveyed intend to buy an investment property in the next year. Yardney says the property boom occurring in Darwin has helped boost investor confidence.
“They have a lot of equity there. It’s a wealth effect, because when people read in the paper that auction results are high, houses have gone up in value, then they’ve got their mind on investing.”
Sentiment is also strong in Brisbane – 61.1% of investors in Queensland intend to purchase a property. Yardney says this result is slightly below the national average, however, and shows some impact from the natural disasters.
And while investors believe Sydney will see strong capital growth over the next five years, Yardney says the upcoming election may put a dampener on immediate capital gains.
“Anecdotal evidence suggests that there is a feeling that a government change will increase investor confidence. Prior to an election, people always put big decisions on hold… and that is happening now.”
There are some challenges – 33% believe access to finance will be the biggest stumbling block in purchasing a property, and 23% believe negative cashflow will be their biggest vice. But Yardney says overall, low interest rates mean more investors are coming back into the market.
“The Reserve Bank has come in this week and kept interest rates on hold, and they’ve indicated they will be on hold for now. They are on the restrictive side, and that message has seeped out into the community.”
“It’s important to point out that this survey is of people who already own an investment property, and aren’t necessarily Mum and Dad investors. But I believe it represents what’s happening in the market at the moment.”
Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
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