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Property investors remain optimistic despite recession

Feb 24, 2020 |GODFREY DINH

COVID-19 has done little to dampen the spirits of Australian property investors, with the majority still keen to invest in housing despite the recession, a new survey found.

About two thirds of investors believe it is a good time to park their money in residential property, according to a survey of nearly 1,100 investors by the Property Investment Professionals of Australia (PIPA). This is a decline from 82% in 2019, and PIPA chairman Peter Koulizos said it was “no doubt a direct impact of the pandemic”.

“While there is no doubt that 2020 has been one of the toughest in living memory for everyone around the globe, property investors have remained resilient in the face of the unprecedented uncertainty that we are all experiencing,” he said.
About 77% of survey respondents indicated that they would not delay their investment plans because of a potential drop in property prices.

“At the current time, the property market has continued to show its resilience with prices materially stable in most parts of the nation,” Mr Koulizos said. In fact, some 44% of investors are preparing to buy an investment property in the next six to 12 months. Less than 40% ruled it out, while one in five were on the fence.

And about 71% of those surveyed said they are less likely to sell in the next 12 months, compared with pre-pandemic days. This could help prevent real estate values from seeing a major decline, Mr Koulizos said.

Who is investing in what?

Of those with property investment plans in the next six to 12 months:
• Three quarters are looking at buying an existing detached house
• Nearly 6% want to invest in townhouses or villas
• About 4% are looking at house-and-land-packages
• 2% are interested in apartments.

Nearly 30% already snapped up a property in the past 12 months, a slight fall from 34% last year.

More first-time investors are dipping their toes into the real estate market. Among those who bought in the past year, 29 per cent were buying for the first time, nudging up from 21 per cent in 2019.

Of these newbies:
• 81% bought a property that was already built – up from three quarters in 2019
• 12% snapped up a new or off-the-plan investment – down from 16 per cent last year
• 7% went for vacant land.

More than 56% of first-time investors already owned they home they were living in, while some 44% say they are rentvesting – an increase from 34% in 2019.

What’s keeping property investors up at night?

Interestingly, not everyone is losing sleep over COVID-19. Access to finance is the biggest concern for property investors.
• 29% are worried about securing finance
• 18% are concerned about Australian economic conditions
• 12% are on edge about their job security
• Less than one in 10 are bothered about the coronavirus

Financial factors seem to be a bigger concern for many Aussie investors with 42% saying they were in a position where they were unable (22%) or unsure (20%) if they could refinance an amount they were previously able to.

Given only about 8% deferred their mortgage repayments during COVID-19 and three quarters did not need to extend their original loan term to lower monthly repayments, the data suggests that on the whole landlords are managing well through the pandemic, but access to finance remains a significant concern.

While 86% reported a positive monthly cash flow, with more money coming into the household than the amount outgoing. About one in seven are in the opposite situation, where they are spending more than their earnings.

“While the financial challenges have been plenty over recent months, property investors have generally been able to manage their cash flows and expenses over the period,” Mr Koulizos said.

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GODFREY DINH

Godfrey has invested in property in Australia and the USA, personally and professionally, for over 15 years. He is passionate about helping landlords on their property investment journey

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