Ben Kingsley

Australian property investors remain bullish about the long-term benefits of residential real estate, shrugging off concerns about stricter lending conditions property price bubbles and oversupply, the third annual Property Investment Professionals of Australia (PIPA) Property Investor Sentiment Survey has found.

The national survey, which gathered insights from 742 property investors, shows that more than 70% of respondents think now is a good time to invest in property, with 61% looking to purchase a property in the next six to 12 months (up from 58% last year).

However, concerns over changes to investor lending policies are looming large, with 43% of respondents reporting an adverse impact in their ability to secure finance, compared to 32% in 2016.

Rising rates on interest only loans were also a key concern, though the majority of investors (55%) with interest only loans said they would not struggle to meet new principal and interest repayments.

As borrowing costs rise, investors are on the hunt for a better deal. More than 23% said they would consider refinancing their loan for an interest rate differential of 0.5 percentage points, while another 23% would consider refinancing for one percentage point.

According to the survey, only 15% of investors have put their buying plans on hold due to concerns around a property price “bubble”. Similarly, investors have shrugged off speculation about negative gearing and capital gains tax changes, with only 14% putting their investment plans on hold.

The survey also shows that only half (52%) of property investors are currently negatively geared, with a majority (62%) of these expecting to become positively geared within five years.

PIPA chair Ben Kingsley said that the survey results confirm that investors remain committed to property as a favourable investment option over the long-term.

“It has been an eventful time for residential property investors since we published our last survey in 2016. Similar to last year, most property investors are looking past short-term challenges and are remaining focused on the long-term wealth benefits that are available from residential real estate.

“The survey also affirms that a lot of the speculation about negative gearing misses the mark. Most investors understand that negative gearing is only a short-term cash flow position, not a property investment strategy. And only a very small minority are attracted to real estate for these tax concessions,” Mr Kingsley said.

Brisbane remains top capital city pick

Despite being the most preferred destination for property investors, Brisbane has lost some appeal, with the proportion of investors favouring it falling from 49% to 43% over the past year. However, the city remains far ahead of any other capital city when it comes to investor interest. After Brisbane, Melbourne is the second most popular investment destination (32%), followed by Sydney (7.8%), Adelaide (6.6%) and Perth (5.5%).

“Property investors are becoming savvier. Many of them continue to look outside of our biggest property markets of Sydney and Melbourne, which are coming close to the peak of their cycles,” said Mr Kingsley.

“The two key reasons that Brisbane still attracts investors are affordability and the potential for attractive yields. Brisbane is investing in infrastructure to make the city more liveable and investors are betting on this.”

Calls continue for regulation and improved professional standards

Although investors are becoming more sophisticated, with 33% having a set strategy for investing, they overwhelmingly (84%) consider that more investment education about the risks and potential benefits of investing in property is needed. Even higher numbers (90%) believe that the property investment industry should be regulated and licensed in the same way as many other professionals.

“Unlike financial planning and mortgage broking, the provision of property investment advice still remains unregulated. PIPA is committed to raising the professional standards of this industry and will continue to lobby the government to regulate property investment advice and educate investors to help them make informed investment decisions,” Mr Kingsley said.

PIPA’s 2017 Property Investor Sentiment Survey – Key stats at a glance

• 742 survey respondents
• 70% of investors believe now is a good time to invest in property
• 61% of investors are looking to purchase in the next 6-12 months
• 43% of investors confirm changes to investor lending policies have impacted them
• 75% of investors are not worried about possible changes to negative gearing
• 90% of investors believe people who recommend property investment should be regulated and licensed

A copy of the 2017 Property Investor Sentiment Survey Report is attached. For full survey results visit http://www.pipa.asn.au/news-and-events/pipa-annual-investor-sentitment-surveys

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Ben Paris

Working Australians face lost wages and increased interest rates on credit cards and personal loans under legislation being considered by the Turnbull Government that “incentivises” bankruptcy, personal insolvency experts have warned.

The Personal Insolvency Professionals Association (PIPA) cautions that proposed changes to Australia’s bankruptcy and insolvency laws would allow borrowers to walk away from their debts without consequences after just 12 months. The current default bankruptcy period is three years.

PIPA Director Ben Paris said these proposed changes were dangerous as they positioned bankruptcy as the easy escape route for anyone facing debt and financial stress.

“The Federal Government is essentially incentivising people into insolvency,” he said.

“Given the high number of Australians in financial stress, these changes will lead to an explosion in the number of consumer-related bankruptcies.

“But even more worrying is the fact that everyday working Australians that will be left footing the bill for this bankruptcy flood as banks recoup their losses through even higher interest rates on credit cards and personal loans.

“With figures showing almost two million Australians already have multiple negative listings on their credit histories, the pool of potential bankruptcies is enormous. Currently only 25,000 people file for bankruptcy each year, but if bankruptcy becomes little more than a 12-month hiatus the numbers will skyrocket.”

The proposed changes are part of the National Innovation and Science Agenda, aimed to encourage entrepreneurship by making it easier for individuals to bounce back from a business collapse. But Mr Paris said only 17% of bankruptcies in Australia were business-related so the law change would fail to achieve this goal.

“However, Australia is experiencing a problem with ‘phoenixing’, where businesses deliberately don’t pay their debts and then file for bankruptcy, and these law changes would encourage this practice further,” he said.

“It’s estimated that up to $3.19 billion is lost each year through ‘phoenixing’, particularly in industries where subcontracting is common, such as construction. Sadly this means working Australians simply lose their wages as while employees’ entitlements are protected, subcontractors’ entitlements are not.”

The Federal Government is currently taking submissions on its Improving Bankruptcy and Insolvency Laws Proposals Paper.

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