Australia property investors are shrugging off finance issues concerned with taxation policy changes and the market slowdown in Sydney and Melbourne, with a growing majority believing this year is a better time to invest than last. That's according to the 2018 Property Investment Professionals of Australia Property Investor Sentiment Survey which has just been released.
What insights did the survey throw up?
The PIPA survey was the biggest one of its kind ever conducted among Australian professional investors. 820 different people were surveyed, a number they hope to increase to over 1,000 next time around.
The PIPA Chairman Peter Koulizos said: “77% of investors believe now is a good time to invest in residential property. Some of the other surprising and very pleasing aspects were that 86% of investors use mortgage brokers, which I found phenomenal. This is great because it gives them a range of choices so far as their mortgages are concerned. From a personal perspective, I love that 2/3 of investors are looking towards houses as an investment option rather than units because generally speaking, houses do perform better than units.
“Once again, Brisbane is the hot favourite for investors. I think a lot of people go up to Queensland and love having a holiday there and, "Oh, this might be a great place to invest." Which is fine provided they do their research. And the other very pleasing news is that 95% of investors want to see greater professional standards amongst their property professionals. If we could get the federal government to listen into that, it would be great if we could have some regulation and minimum education standards, not only to get into the property investment advice industry but to stay in.”
What issues are on the horizon?
The two main issues fast approaching the industry are to do with lending policy. More specifically, investor lending policy and how difficult the banks are making it for investors. They are almost penalising them for wanting to increase their portfolios.
Peter explained: “What really alarmed me is when a colleague of mine showed me an article on the Finn Review website where Westpac was saying they don't want investors that have interest only loans and have an LVR of greater than 80%. But what was more remarkable is that they were going to help them. Westpac, which includes St. George, BankSa, and Bank of Melbourne. They were going to help them find a different lender. I have never heard that before. Interestingly two days later, Westpac have come out and said, "No, no, no. That's not correct." But good sources tell me that people have received those letters.
“Assuming that that is not correct, or Westpac have retracted it, my concern was when I first saw it, if the other big banks catch on, that would be very worrying. The good thing is that second tier lenders would come into play, but if you've got your major banks shrugging off investors who only want interest-only loans or only have a deposit of greater than 20%, that would not be good, not only for investors but more importantly the whole property industry and the whole economy.”
What affects could negative gearing have?
Some banks are talking about how they're really tightening up and they've made the decision that sometimes they just turn their book off. They're just not interested in taking any more risk. The survey said 45% of responders indicated that they would reconsider their future investment plans as a result of any proposed changes with regards to negative gearing. This is definitely on the agenda because the labour party have been quite transparent about the fact that if they get into power, they certainly are going to play with it.
Peter said: “That is also very worrying. Almost half of the investors surveyed would seriously consider buying investment property if those negative gearing options were taken away or reduced because the other thing that's going to do is that's going to reduce demand for property which is going to put pressure on property prices to go down, which doesn't help anyone. I can understand, especially from the labour party's point of view that they may want to limit negative gearing benefits. I understand that. But to the blanket, put restrictions on most people that own one investment property to those that own 50, I don't think that's fair because that's not really helping the mom and dad investor look after their own retirement. Because that's what most investors get into property for, as was pointed out in the survey. They're doing it to help them in retirement.
“The reality is negative gearing is a necessary evil. People do it because they have to. But the property's not negatively geared forever, otherwise, it's a hopeless investment. So, the first few years are negatively geared, but then if they keep it safe for that 30 year loan period, the majority of those years are positively geared. I don't think the federal government has thought this through properly, because if fewer investors get into the market and they collect fewer capital gains tax income, surely, they must collect much more in capital gains or income tax from investment property than they fork out in the first few years in tax benefits.”
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