There is no doubt that 2019 has been a roller-coaster year for the Australian real estate market, but if you're curious about what 2020 could bring to the real estate market and what investors are planning to do, the writer Head of your investment property Sarah Megginson and Property Commentator and Investment Advisor Michael Yardney unveils the latest result of the survey on this year's real estate investment sentiment.
More than 1,800 respondents participated in this year's Real Estate Investor Sentiment Survey, Australia's largest survey of real estate investors. The annual survey is conducted by Your Investment Property, the only independent magazine on real estate investing in Australia, PropertyUpdate, the # 1 real estate blog in Australia; and onthehouse, a Corelogic company.
So what were the biggest takeaways?
New Year, New Hope
Investors who participated in the survey are optimistic about their plans for 2020.
A whopping 42% said they were planning to buy a property in the next 12 months. Forty-one percent said they would buy a house, while 31% would buy a property with potential added value.
Forty-three percent of respondents also stated that they would buy an established property, while 35% would buy a property with potential value-added (renovation or development).
Only 7% would buy an apartment as an investment property.
Yardney says that it is not surprising.
"(There is) a lot of negative news about apartments, especially new ones, high-rise buildings, those with structural problems. And the apartments have not been as good as a house, "he says.
2019 has been difficult for apartment owners and continues to unfold with the problem of Opal towers in Sydney, adds Megginson.
"I would not invest in an apartment without the really clear strategic advice of someone who can guide you in the right direction, as it can go wrong a bit too quickly," she says.
Many investors are hoping for price growth in 2020.
Forty-four percent of investors surveyed said real estate prices in 2020 would increase from 0 to 5%, while 18% think they would increase by 5 to 10% and 15% stated that prices would remain stable.
This feeling is echoed in a recent ME Bank report.
"After a period of declining prices in major Australian real estate markets, steady increases in housing prices over the last three months have created a much needed period of stability, providing greater certainty than early increases in prices. prices were not just a failure. the data, "said Andrew Bartolo, managing director of ME Bank for home loans.
According to CoreLogic, housing loans to first-time homebuyers are expected to moderate as investor activity picks up and prices rise.
"Housing prices are rising again in most parts of the country while household income growth remains sluggish, which will create new pressures on housing affordability in markets where the value of housing is rising. Housing is growing faster than incomes, "said Tim Lawless, director of CoreLogic. research.
The best capital growth over the next five years
For investors, Melbourne is the region with the best prospects for capital growth over the next five years, with 39% of respondents choosing the Victorian capital as the preferred investment location for growth. It is followed by Brisbane and Sydney.
Nineteen percent also cited regional Australia as an area of ??potential capital growth over the next five years.
However, the timing of the investigation certainly had an impact on the results.
"If we had done this survey even six months ago, I think we would have had extremely different results because six months ago we were in the middle of a federal election and there were so many things in suspense. This particular year just comes to be such a roller coaster for real estate investors, "says Megginson.
Thirty-five percent of investors surveyed said that a single-family house on a suburban block in a suburb of the central ring capital would make the best investment over the next five years.
On the other hand, 25% said that a value-added property would make the best investment, while 11% voted for a single-family home on a suburban block in a corridor. external suburban growth as an excellent investment.
But Yardney warned against these types of properties.
"This is not where we are going to get as much capital growth because the abundance of supply is the enemy of capital growth. These are corridors of growth, population growth, but not necessarily capital growth, "he says.
Roadblocks
Despite plans full of hope for the coming year, investors are still facing some obstacles preventing them from buying more investment properties.
Forty percent of respondents said that stricter bank lending policies for investors have affected their ability to buy another property.
Twenty-six percent also cited difficulties related to the ease of loan management as another factor that prevents them from buying their next investment.
"Despite lower interest rates, it is still the banks' tighter loan facility criteria that are creating the problem," Yardney explains.
Uncertainty about the economy and the lack of deposits or equity were also cited as barriers preventing the purchase of another property for investment.
When asked if the time was right to set the interest rates, 50% of respondents answered no, while 30% thought it was time. Nineteen percent were uncertain.
What is your end game?
For many, investing is a way for them to better support their loved ones.
Forty-three percent said they were investing to provide a better lifestyle and more choice to their family, while 41% said it was so that they could to be a self-financed retiree. Thirty-eight percent cited taking early retirement and having more choices as a reason to invest.
Thirty-seven percent also said that the "final game" of their property was to live from renting, while for 23% it was to sell all or part of their real estate investments. Eighteen percent said their ultimate goal was to keep their properties and never sell them.
But investment is not just an option to fund retirement, because wealth and property can create better choices for investors.
"What I encourage our readers to do, whenever we put together stories about wealth creation in the magazine, is really not to focus on the word retirement or the retirement concept, but on the concept of choice. Because for me it is wealth and property. It's about creating choices, "says Megginson.
Thirty-two percent of respondents said that they would not ask anyone for investment advice to go ahead.
According to Yardney, if you want to outperform the average real estate investor, you should seek advice from someone.
Just having a bad experience with the property to become very depressed, adds Megginson.
"Whomever you get your advice can shape your financial future and advice can come very subtly in the form of friends and well-intentioned families who do not know what they are talking about, who encourage you in some way direction, which can lead you on the wrong path, "she says.
The real estate investment sentiment survey covers more than 20 questions on real estate investing, assessing what investors think about current real estate markets and what they plan to do for next year. For a complete overview of the results of the survey, listen to the podcast here.