Investor confidence to move to 'neutral' stance in 2016

by Julia Corderoy18 Nov 2015
Investor confidence will move to a more neutral stance in 2016, according to the head a leading property investment association, but there will be plenty of opportunities out there for smart brokers.

Speaking to Australian Broker, Ben Kingsley, the chair of Property Investment Professionals of Australia, said the tighter regulations and higher rates on home lending – particularly in investment lending – won’t necessarily deter potential real estate investors.

“We actually saw investment activity increase even when effectively the retail rate was at a low – and not a historical low. What I mean by that is we had obviously two or three further rate cuts in the last 12 months but prior to that we actually did see some decent investment and positive sentiment towards the property market,” he said.

“I think you will find that with these latest changes there has definitely been a confidence shift to a neutral confidence position, from a positive confidence position that we saw before… We had strong investment activity when interest rates were at 4% and 5% in the past.”

Kinglsey said the type of property investor we are seeing in the market may shift slightly but he still expects a lot of activity in the ‘rentvestor’ market – young buyers who are choosing to rent where they want to live while buying an investment property in a more affordable area.

“It will certainly stop those who are usually confident investors but don’t necessarily have the confidence in the market as the negative press in the mainstream media starts to take shape. What we do know in mainstream press is there is never such thing as a balanced market – there is either a boom or a bust.  I think that will move confidence to a slightly negative position, particularly in Sydney and quite possibly in Melbourne. 

“We will see a slowdown in investor activity in those particular markets but I do think we will start to see the more experienced investor – whether they will be high net worth or a ‘rentvestor’. I don’t think we will see the evidence that rentvestors will walk out of the market because of this. I think rentvestors are here to stay and there will be more and more people who will choose to live where they want to live and look to supplement their wealth position by investing in property.”

In fact, rentvestors might drive a boom in interstate property investment. 

“[Rentvestors] might be the next lot of borderless investors. I think the theme for investing as people get more and more knowledge will be to look outside of their own state. In 2016 I think we will start to see more of that and I think there will be more use of buyers’ agents and property investment advisers to help facilitate that,” Kinglsey said.

According to Kinglsey, this means brokers can have a real competitive advantage if they build up their professional networks wisely. 

“We saw in our sentiment survey that it is very clear that mortgage brokers play a vital role and are the preferred supplier of funds for sophisticated investors. It is clear they have a competitive advantage over lenders generally and because they do have networks or professional advisers to help them facilitate and implement a safe property investment," he told Australian Broker.

“I think there is no doubt that there will be increased cross referrals between buyers’ agents and property investment advisers to mortgage brokers. Those relationships will be important, especially in a complex market as confidence moves to more of a neutral confidence. If people are going to be active in the market, especially whilst listening to mainstream press they will want to deal with professional qualified advisers to ensure they are not making a mistake and reaffirm their beliefs that they really want to buy.

“From a broker’s point of view, we would absolutely be saying to them that if they are going to play in the property investment space, they will need to continue to build up their knowledge and look at their resources. Coupling up with a PIPA member if they are not already a member of a professional association and building up networks through that association would be a great move for them.”
 

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