Ready to race for property?

We recently ran a survey that found three out of four Australians planning to buy an investment property in the next two years were waiting until the First Home Owner Boost (FHOB) expired.

Seventy-six per cent of the 1,038 respondents to our 2009 Property Investors Survey said they were delaying their upcoming investment property purchase until the FHOB ends on December 31, 2009.

Interestingly, before the extension was announced, only 26 per cent were delaying their purchase until the initial completion date of June 30, 2009, had been reached.

The independently commissioned survey highlights an observation made recently by many of the company’s franchisees.

We have been hearing from a number of corners that property investors are all set and ready to go once the boost has had its day.

Competition from first homebuyers has been so intense since late last year that most investors seem to have stepped back for the moment. A large number are calling our loan consultants to see how much money they can borrow from the various lenders on our panel and getting their finances in order, all in preparation for hitting the ground running to purchase in 2010 or 2011.

Most residential property investors are competing for the same types of properties as first homebuyers (ie, three-plus bedroom houses close to transport, schools and other facilities).

Given the keen sense of urgency among, and perhaps a less considered approach by, the latter group, it is no surprise that investors are turning their back on entering the market at this point.

But the door will be opened during the next 12 months, if the survey results are anything to go by.

Forty-four per cent of respondents, all purchasing an investment property in the next two years, were Generation X, 27 per cent were Generation Y, 28 per cent were Baby Boomers and 1 per cent were Builders. Twenty-five years of age was the most popular age upon purchase for Gen Y, at 15 per cent.

South Australia had the least number of Gen X and Gen Y respondents than all other states and territories (at 38 per cent and 17 per cent, respectively) and the most number of Baby Boomers (at 40 per cent).

Over one-third of the respondents — 37 per cent — rated their level of confidence in their state’s housing market as ‘high’ (32 per cent) to ‘very high’ (5 per cent). Fifty-seven per cent rated it ‘moderate’, 6 per cent rated it ‘low’ and only 1 per cent rated their confidence as ‘very low’.

Queensland respondents were the most confident in their state’s housing market, with 40 per cent indicating ‘high’ or ‘very high’ confidence, followed by Victoria at 37 per cent and South

Australia at 36 per cent.

In some good news for the housing industry, 64 per cent of the respondents already own a home yet plan to add to their portfolio by buying investment property in the next two years.

Surprisingly, 20 per cent plan to buy both a home and investment property in the next two years, while 13 per cent are planning to enter the property market for the very first time, forgoing their First Home Owner Grant to buy an investment property before a home. Three per cent plan to sell their home and buy an investment property.

Intending property investors were more likely to be considering purchasing a house (66 per cent) and less likely to be considering a unit/apartment (53 per cent). Builders were the only generation to buck this trend, with 50 per cent of respondents keen to purchase a small unit/apartment as opposed to a house (38 per cent). Twenty-nine per cent of respondents said they were looking to buy a townhouse/terrace, 6 per cent a duplex and a further 6 per cent a commercial property.

Three-quarters saw property investment as a better bet than investing in shares, which is not so surprising considering the rollercoaster ride the share market has taken many of us on.

The top 10 key motivators behind these respondents planning to buy an investment property were:

• 91 per cent — a desire to set themselves up financially for the future;
• 78 per cent — the benefits of the current property market;
• 76 per cent — potential for housing price rises;
• 75 per cent — low interest rates;
• 75 per cent — a belief there is greater benefit in investing in property than in the share market;
• 71 per cent — tax benefits;
• 69 per cent — a belief property investment will help achieve financial goals sooner/better;
• 53 per cent — capital gain;
• 52 per cent — reading and/or hearing of others’ success; and
• 51 per cent — high rental yields.

It is great to see many of these upcoming investment property purchasers have lofty ambitions as market players. Eighteen per cent of respondents said they plan to create an investment property portfolio of ‘as many properties as possible’, 49 per cent were looking to own two to three properties, 17 per cent wanted only one, 10 per cent were planning on four to five, while an ambitious 3 per cent were planning on six to 20.

Twenty-nine per cent will purchase their investment property on their own while 62 per cent will buy with a partner. Four per cent will purchase with a sibling, 3 per cent with a parent and a further 2 per cent with a friend.

When purchasing their investment property, the features respondents considered most important in order of preference were:

• price;
• locality — convenience to amenities and transport;
• number and/or size of rooms;
• locality — prestige;
• features — such as driveway access, garage, swimming pool, backyard, fireplace and so on;
• aesthetic appeal;
• age of the property; and
• green/environmental aspects or initiatives.

It seems most buyers are looking a fair way into the future when it comes to holding onto the property. Forty-seven per cent said they were intending to keep it for 10 years or longer while 41 per cent were planning on five to 10 years. Only 11 per cent said up to five years.

Those who are crowing about a ‘big black hole’ of housing finance demand after the FHOB has reached its deadline should reconsider their opinion and perhaps go so far as to consider joining the next wave of buyers.

There are certainly a plethora of positive factors at investors’ fingertips — historically low interest rates alongside historically low rental vacancy rates, greater demand than supply, a number of extensive infrastructure programs around the country, increasing rents, healthy migration levels and relatively stable housing prices.

We’re preparing for the rise of property investors in 2010, along with borrowers looking to upgrade and refinance. Are you?

Kristy Sheppard is senior corporate affairs manager at Mortgage Choice.