Property investor insights

frank (1)The ANZ Bank and the New Zealand Property Investors’ Federation (NZPIF) have released the findings of their annual property investors’ survey.

It’s an interesting insight into the thinking of residential property investors and how that thinking is changing. 1368 property investors took part in the survey. Here are the main findings (as paraphrased from their report).

  • Half of the investors were small investors with one to three properties (52% last year). A further quarter were medium investors with four to six properties. Full-time investors with 10 or more properties increased from 9% last year to 11% this year. That would suggest long-term investors have been accumulating property while mew investors have largely stayed away from property investment.
  • 45% of property investors use a property manager for at least one of their investment properties. This is the highest proportion since the start of the survey. A further 16% of investors would consider using a property manager. This confirms a now established trend away from DIY property management, a trend that is likely to continue.
  • 42% of respondents owned investment property in their own name (up from 39% last year). Ownership via a look through company (LTC) was the next most popular ownership structure at 32% (up from 31%). Owning a property in a family trust was unchanged at 29%.
  • 92% of respondents expected property prices to increase over the next year, up from 87% last year and 71% in 2011. The median expected increase over the next 12 months was 4.3%, but investors were expecting that rate of growth to slow to between 6% and 10% over the next five years. That’s more optimistic than last year’s survey result, reflecting a growing confidence in property investment.
  • The timeframe within which investors intend to buy their next rental property has not changed since 2012. Approximately half intend to purchase another property within the next two years, and around 4 in 10 do not plan on purchasing another rental property.
  • The number of investors who see government regulation and tax changes as a risk for property investors continues to rise sharply. In 2010, just 12% rated this as a risk. This year, the percentage of investors rating this as the biggest risk had risen to 48%. I find this no surprise given a Labour/Green government is an odds-prospect to win the 2014 general election. This year a greater proportion of investors also mentioned that insurance premiums and interest rate volatility are the main risks to investors. Fewer investors than last year think the biggest risks/issues to investors are tenants defaulting on payments, vacancies, property values decreasing, and not meeting expected return.
  • One in every ten property investors is completely debt free. Around 6 in 10 investors have debt that is 50% or more of their property value. These results are similar to last year, with 20% of investors saying their debt-to-value ratio has increased, and 41% saying it has decreased over this period. Increasing property values were the main reason cited for improved debt-to-value ratios, rather than reductions in nominal debt.
  • Almost 3 in 10 investors say the Canterbury earthquakes have caused them to reassess the attractiveness of being a property investor. Around half of these investors say the reason is that property investment is now less attractive because of higher insurance premiums.

In summary, investors appear cautiously optimistic about the prospects for residential property investment, but most are all too aware of the potential risks that await in 2014.

One metric turning decidedly positive is immigration. In September the net gain of 2,740 persons was the strongest monthly net inflow in a decade.  In the 2013 calendar year there is expected to be a net gain of 20,000, the highest net inflow since 2009. The relative strength of the NZ economy vs Australia and Europe appears to be the major factor behind the turnaround. Departures are down 26% annually.

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