Continuing our analysis of our households surveys to September 2017, today we look at the property investor segments (which account for one third of mortgage loans). We already highlighted that investors have become less bullish about future home price growth:
For example, in 2015, 77% of portfolio investors were intending to transact, today this is down to 57%, and the trend in down. Solo investors are down from a high of 49% to 31%, and again is trending lower.
Now we look at what is causing this.
The underlying reason for Investors to transact has been changing, with the tax breaks (40%), and better returns than deposit account savings (35%) together now accounting for two-thirds of the motivation. Appreciating property values has been squeezed (10%), as has access to low rate finance (5%).
Turning to the barriers which investors face, the difficulty in getting finance is on the rise (29%), along with concerns about rate rises (12%). Other factors, such as RBA warnings (3%), budget changes (1%) only registered a little but concerns about increased regulation rose (7%) . Around one third though already hold investment property (33%) and so will not be buying more in the next year. So, net demand is weakening.
The importance, when it comes to obtaining finance, of the price in the purchase decisions for investors is clear. Flexibility and loyalty to a specific lender count for naught.
Those investing via a SMSF exhibit somewhat similar drivers in terms of motivation to transact, with tax efficiency a strong motivator (37%), as well as appreciating property values (22%), and leverage ( 17%).
We see some changes in where SMSF Trustees get their advice, with more relying on internet forums or sites (23%), their own knowledge (20%) and a mortgage broker (16%). Advice from real estate agents is on the rise, (14%), and is now similar to accountants (13%).
The mix of property held in SMSF has not changed much, with 70% holding less that 40% of their investments in property.
Next time we look at first time buyers.
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