Momentum Wealth’s annual Property Investor Survey gives unique insights into the minds of Australian property investors, uncovering the latest trends and preferences amongst those in the market. The results presented in this report are based on the responses of 483 participants who have a variety of experience in property investing, from complete novices to experienced, multi-million-dollar portfolio owners.
A key finding of the survey shows that Brisbane and Perth are the most preferred capital cities to invest into.
According to Emma Everett, team leader of Momentum Wealth’s buyer’s agents, not only were these capital cities’ affordability a key factor, investors find Brisbane and Perth a lucrative investment opportunity due to the potential long-term benefits.
“Whilst both markets offer strong levels of affordability compared to Sydney and Melbourne, they also hold promising opportunities for long-term growth, with Brisbane already experiencing overall price growth and areas of Perth performing strongly as the market enters its recovery,” she said.
For investors looking to enter these markets, Ms Everett recommended that, as with any property, they conduct their due diligence into the property and the area.
“In these early stages of recovery, it’s not uncommon for different areas of the market to experience price growth at different times, so investors will need to remain diligent in their research to ensure they are selecting an area that aligns with both their investment strategy and growth expectations.”
Key findings
Brisbane and Perth prove popular amongst prospective buyers
Brisbane and Perth were considered the most appealing capital city markets to invest in amongst respondents, with Perth emerging as the leading preference after collecting 36%
of the vote. Many cited the Perth market as being at the bottom of the property cycle as the main reason behind their selection, whilst those who selected Brisbane outlined opportunities for growth as the primary factor driving their decision.
Long-term growth still the biggest goal
Respondents overwhelmingly chose long-term capital growth as their preferred investment strategy, with 64% of survey respondents highlighting this as their strategy of choice. When asked which property type would appeal to them most, the majority of invests outlined established housing as their preference. Houses in close proximity to the CBD generally offer larger land content and stronger growth/ rental prospects, and therefore typically provide the best capital growth for investors.
Loan reviews on the rise as restrictions hold buyers back
The proportion of respondents reviewing their loans rose 8% from last year’s survey, with 67% of participants stating they had reviewed their loans in the last 12 months. Tighter lending restrictions and uncertainties surrounding the Banking Royal Commission have inevitably played their part in driving this trend, with respondents underlining borrowing and servicing issues amongst the biggest barriers to entry.
As these financial uncertainties continue, savvy investors are realising the importance of regular portfolio reviews in ensuring they are receiving the best rates and lending products to support their investment goals.
Pooled investments gaining traction, but lack of knowledge still a barrier
Although only 9% said they own one or more commercial investment properties, a significant proportion of respondents (57%) said they would consider pooling money together with other investors via a trust or syndicate to access high-net worth investments such as commercial property and residential development syndicates.
The high purchase price and level of market
knowledge required to secure high-performing sites or properties can make such assets difficult to attain; however, joining forces with other investors can help buyers overcome these barriers
and gain exposure to these assets at a fraction of the cost of investing directly.
Lending environment still restrictive
Also to come out of the report was that 67 per cent of respondents reviewed their loans over the last year to November 2018, a rise of 8 per cent from the previous year’s results.
Caylum Merrick, team leader of Momentum Wealth’s mortgage broking team, said the current tightening of finance made loan reviews more of a priority than ever.
“In today’s lending environment, and in any lending environment for that matter, it’s vital that investors conduct regular loan reviews to ensure they are still receiving the best rates and products to support their investment goals,” Mr Merrick said.
“Whilst we’ve seen record low interest rates in recent years, we’ve also seen a number of buyers impacted by changing lending restrictions. With many banks now raising their interest rates outside the RBA cycle, it’s more important than ever that investors keep their finger on the pulse,” he said.
Impact of negative gearing changes
Labor’s potential change to negative gearing is also set to affect the majority of investors, with 61 per cent of respondents saying they have negative cash flow.
However, Ms Everett said that property investors should be focusing on investment fundamentals, rather than gearing.
“Whilst negative gearing provides a useful tax benefit for those with a negative cash flow portfolio, investors need to remember that tax offsets only form a small portion of a property’s overall returns, and that factors such as land value, location and tenant appeal remain critical to a property’s performance,” she said
“Investors who get these fundamentals right from the start will be better placed to weather potential changes and short-term volatilities in the market.”
Source: Momentum Wealth