The latest Investor Insight research report compiled by economist Tony Alexander identifies that residential property investment intentions have remained relatively consistent over the past year – with a growing number of investors moving away from new build purchases toward buying existing dwellings.
“Twenty-four percent of existing property investors responding to the survey have reported that they are thinking about another property purchase in the coming year,” says the latest Tony Alexander Investor Insight report - which is essential niche reading for those with investment-grade real estate assets.
“This is virtually unchanged from the previous two months. Over 65 percent of our respondents report that they intend holding their property asset for over 10-years or longer. There is no trend easing in this planned holding period measure – despite the weakness in property prices currently being observed.
“Investor interest in purchasing a new townhouse is back on its upward trend. The preference amongst those thinking about buying an existing property is strongly in favour of a standalone house.”
The Tony Alexander research highlights multiple different trends and patterns across the residential investment property sector, such as:
• Almost 90 percent of investors with mortgages coming up for renewal intend fixing for one or two-years
• Increasing interest rates are not driving accelerated debt reduction of residential property investors
• The peak period of difficulty getting finance from banks was between October and February. Things have improved since then
• As ever, the biggest concerns of residential property investors are the new Government regulations favouring tenants and loss of ability to deduct interest payments from rental income
• Usually there are more people citing selling for retirement than for any other reason, and that remains the case this month for 37 percent of survey respondents
• Interest rates for bank deposits remain low as an alternative investment option
• The most common rent rise being contemplated by landlords is five percent.
Interestingly, the second highest proportion of respondents to the Tony Alexander Investor Insight survey questionnaire came from Canterbury. As would be expected, Auckland contributed the highest percentage of respondents. However, the solid support from Cantabrians reflects how big a part of the investment scene residential property is down here - although the activity flies pretty much below the radar for many in the public.
In response to the underlying investor buyer demand for investment stock in Christchurch, Bayleys Canterbury has compiled an Investment Auction Day – taking place at the agency’s Riccarton offices on August 4, and bringing together some 10 residential property opportunities up for sale.
Properties within the Bayleys Canterbury Investment Auction Day portfolio range from two-bedroom flats, through to six-bedroom student rentals, community leased stand-alone house and an ‘as is, where is’ property. Some of the homes are already tenanted – with the tenants indicating their intentions to stay on under any new ownership – while others have been made vacant so new owners can set their preferred rental rate.
A proportion of the listings have the opportunity to add value by reconfiguring layouts or undertaking refurbishments, while others are in a ‘turn-key’ state ready for new tenants.
Bayleys Canterbury Residential investment leader Angela Webb said feedback from within her group’s buyer and vendor databases replicated the sentiments evidenced in the Tony Alexander Investor Insight report.
“Most of our vendors at the upcoming auction day are taking advantage of the considerable capital growth which has been achieved on their asset over the lifetime of ownership, and are now crystalising that gain. Some have indicated they will use the proceeds to fund international travel, some are looking at paying of their personal home mortgages, and others are looking to pay down debt for retirement,” said Angela Webb.
“On the other side of the equation, we have a strong network of ‘qualified’ first-time investors and experienced investors saying they are looking for ‘bricks and mortar’ investment assets in the city rather than the higher risk options offered by the share market, or the low rate of return options offered by bank deposit accounts.
“Owning residential real estate in Canterbury for investment purposes still remains a fundamentally sound decision when you look at the figures. In most cases, the yield will be higher than bank deposit interest rates.”