Investors bullish about residential property

Posted on 12/05/2007  
More than two thirds of property professionals in Australia expect the residential market to improve in the next half-year, according to financier Ashe Morgan Winthrop’s six-monthly survey.

 

AMW collects the views and opinions of 900 property professionals in four categories – small investors, large investors, lenders and advisers. The ’advisers’ were the most bullish about the outlook for residential property, with a 25% improvement (to 71%) since the Spring 2006 survey, followed by small investors (68%) and large investors (66%).

An average of 66% of respondents expected the market to improve, with the most bullish outlook reserved for Victoria and Queensland (each recording over 74%). The 20% increase in positive expectations since the last survey was the strongest indicator of confidence in the residential property sector over the 11 years AMW has been producing the survey.

In another of the headline results of the survey, 54% of all respondents advocated investing in residential property – a 9% increase since the last survey – in preference to other property sectors, where support ranged from 14% (office) to retail (8%).

However, a different result emerged from Western Australia, with most commentators now agreeing the market’s love affair with WA property has long passed its honeymoon period. Support for WA fell 13% from the last survey, with only 25% advocating investment in WA’s residential property sector.

“The result will come as a relief to many who will view the support for WA as returning to a more reasonable level after some heady days,” AMW commented. “The preference for WA fell across all groups of investors and market players, with the most dramatic drop among lenders, whose support fell by 19% to 26%.”

The AMW survey shows expectations of rising rental yields throughout the property sector, with a record 66% expecting a rise in yields over the next six months, including 12% who expected a ‘significant rise’. Previously, the largest support for an expected improvement in rental yields was 54% (Spring 2006) and the proportion who expected a ‘significant’ rise in rentals varied from 0.5% to 4.5%.

“The residential sector holds the most positive outlook for rental yields with a total of 77% of investors forecasting improvements,” AMW’s survey said.

The survey was completed before the Reserve Bank’s most recent decision to hold official interest rates at 6.25%, a situation apparently expected by the property sector, as only 7.3% of those surveyed nominated concerns about rising interest rates. Survey respondents nominated a lack of suitable stock as the single greatest impediment to investment, with 27.5% of those surveyed concerned about supply, with the next greatest impediment to investing being government duties and taxes (14%).

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