Share volatility wooing investors

by Adam Smith02 May 2012

Property investors are showing new interest in the market with more than a quarter of homeowners looking to buy an investment property.

Research released by LJ Hooker has claimed 26% of current homeowners plan to buy either an investment property of holiday home. L. Janusz Hooker, deputy chairman of the real estate company, said the volatility of other asset classes has sent Australian investors back toward property.

“Uncertainty in the share market is drawing Australians back to traditional investment options to ensure long-term results,” Hooker said.

Chan & Naylor director Ken Raiss agreed, and said renewed activity from investors could signal an eventual upturn in the housing market.

“Anecdotally we are seeing more interest from property investors both new and old. Whilst this increase is modest, it indicates new confidence and the likelihood of a new property cycle,” Raiss said.

MPA Top 100 Broker Troy Cameron said he has seen this trend play out firsthand. While buyers had previously been wary, Cameron said investment activity was beginning to return.

“We have seen a trend of clients being quite conservative with their spending or investing over the past 18 months, but we are now experiencing a large volume of clients feeling the confidence to get back into the investment property market,” Cameron said.

Interest rates still rate highly with potential investors. The LJ Hooker research indicated that 42% of homeowners based their decision to choose a second mortgage on available interest rates. This being the case, Raiss predicted that banks would have to follow future RBA movements to re-instil confidence in investors.

“The banks reducing their own rates in line with the RBA will act as a confidence booster which in turn will increase expenditure on consumables and investment. Ultimately the biggest stimulus for the Australian economy is healthy competition between banks,” Raiss said.

Raiss encouraged any would-be investors to research thoroughly before entering the market. He called on investors to look on property as “an exercise in financial diligence rather than of the heart”. Hooker agreed, and said mortgage brokers could be key in advising first-time investors.

“Investors tend to get excited about the idea of capital gains but forget to factor in additional expenses, taxes and how they will manage an additional mortgage,” Hooker said.

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