Recently QBE LMI published some hard data into property market sentiment that revealed surging investor confidence, a preference to enter the market post election and areas identified as favourites for the coming year.
Property appetite certainly seems to be increasing on the back of near record-low interest rates, increasing price growth and a preference away from the economic uncertainty of the share market to something more stable.
While consumer confidence has been in the gutter for some years, despite ideal conditions for investment on a national level, the outlook now is rather different. Nearly half the people surveyed believed prices will rise strongly in the next 3 years with more than half believing that foreign investment alone will push prices even further.
ABS Statistics show that loans to investors have soared by 16% in the last 12 months, with 39% of investors currently on the lookout and looking to buy in the following 12 months – 56% of those in the post-election period. (The premise is that the party that wins will be the majority, so the majority of people will tend to feel more confident because they voted for the winner).
Given this sentiment surrounding the election we’re likely to see a lot of activity come the Spring and Summer period subject to no major economic outfalls occurring.
The issue of affordablity
Of course affordability continues to be an issue with 1 in 3 being affected and looking to invest in a different location than originally thought or willing to move further toward the city fringes. No surprise there though. I can’t remember a time where people walked around talking about how cheap property was. Most people have to make some sacrifice on location in order to get a stake in the market. My grandparents literally moved to the sticks to find something they could afford. Those “sticks” turned out to be the start of the Shire.
Despite the lack of affordability, capital cities will continue to prove popular.
In Sydney, those surveyed indicated a strong preference for the inner west, with 42% of people looking to target this area in the future. This was followed by the growing Parramatta market at 29% and the more blue chip suburbs of the lower north shore following closely behind.
In Melbourne, 40% of investors are looking to the South East, followed by East Melbourne at 31% and the CBD at 25%.
A growing taste for property to fund retirement
The rules surrounding Self Managed Super Funds (SMSF) have been changed in recent years to allow for borrowing inside Super funds. While this has taken some time to catch on the market at large is now starting to take notice, with 22% of people now seeing property as a way to fund retirement, up from 17%.
Ironically, while the number of people looking to buy property inside Super has shot up from 9% to 22%, those likely to buy outside Super to fund their retirement has doubled, from 9% to 18%.
This growing taste for property in retirement – either inside or outside of Super – shows a preference to move to safer and less volatile type assets when it comes to providing for our future.
Regardless of the reasoning though, it’s clear that there is a growing appetite for property investment in both the short term and long term within Australia.
Markets have been idle across many parts of the country and the economic conditions are now ripe for prices to push further ahead. Consumer confidence is on the rise and the market’s expectation that prices will rise will attract more people looking for an opportunity, at least once the smoke clears from the election.
Combine this with the recognition that property is increasingly viewed as an asset that you can bank on for the preservation of assets in retirement and we’re likely to see Australia’s love affair of property continue for some time to come.