Property Investors Get A Second Wind

Photo: Market Properties RI, Creative Commons

The latest Digital Finance Analytics Survey results indicate that momentum in the property investor segment is set for an upswing, as we move into the spring season.

When we last reported on our survey results, there was a dip in intentions, quite strongly linked to budget uncertainly. This has largely evaporated, though there are still continuing concerns about potential benefit cuts.

Today, we summarise some of the recent results pointing in this direction.

Purchasing Intentions

First, we look at prospective purchasing intentions across our segments. We see first time buyers still languishing, whereas solo investors, portfolio investors and upgraders are increasing in momentum compared with results from June.

House price expectations are pretty similar to earlier in the year. More are thinking prices are set to continue to rise, rather than fall.

“We think that investment lending will continue to outstrip owner-occupied lending, and reach new records in coming months.”

Sole investors are being motivated by the prospect of appreciating property values and better returns than deposits. They also continue to be attracted by tax breaks associated with investment purchases.

Superannuation investors are still being attracted by the tax efficient nature of this investment class, and they are backed by the expectation that prices will rise. They are also responding to lower deposit rates.

SMSF Investments

Looking at those SMSF funds with property, we see that most have 30 to 40 per cent of their super aligned with property, but there is a wide spread. The absolute number of SMSFs with property remains quite low, but it is growing.

“Sole investors are being motivated by the prospect of appreciating property values…”

So what is driving the resurgence of investors? We see that that overhand from the budget has mostly gone now, and funding is readily available. We also see that those who already bought are coming back for more.

Budget Factors

Finally, when we look at the budget factors in particular, we see that the high income levy still has an impact, whereas fears of changes to negative gearing has fallen, along with fears of changes to superannuation rules. We note though that concerns about reductions in benefits remains.

So, putting that all together, we think that investment lending will continue to outstrip owner-occupied lending, and reach new records in coming months.

We will incorporate this latest data into our models, and plan to publish an updated edition of the Property Imperative later in the year.