A biannual Investors Index survey by MRD Partners revealed that there are more investors planning to buy properties this year. The survey collates responses from 10,000 investors and found out that about 60 percent of investors had the intention to buy this year, in comparison to 25 percent at the same time last year. The survey also showed that majority of those interviewed would opt for property investments in housing and land over units, with 63 percent preferring the former over 37% for the latter.
MRD Partners managing director Nick Lockhart comments, “Buyer confidence in property is returning and there’s broad expectation that now is the time to buy. The market is favouring the stability of bricks and mortar and seeking long-term capital growth.”
The survey discovered that investors remained careful about the price they would spend on the property with their ideal range between $350,000 and $450,000. Mr. Lockhart explains, “Buyers want capital growth and that price point—and if they’re careful about where they buy—it’s where they’ll get it.”
Meanwhile, 74 percent of first time investors were getting ready to buy this year and were naturally even more cautious with their planned first investment and were only willing to spend between $250,000 to $350,000. Mr. Lockhart explains that this could be for several reasons citing financial concerns, comfort level with monthly repayments, and emotional reasons as just some of investors’ motivations to choose a lower price point.
The survey came just after a separate study by RP Data last week revealed that sellers earned an accumulated $15.2 billion in profits in the last quarter of 2013 in property re-sales. The report also showed that the best region for turning a profit was Victoria’s Loddon Shire region, and then Sydney, Perth, and Central Highlands in Victoria. Overall, properties within capital cities performed the best with only 6.5 percent suffering a loss. This represents the lowest level in three years.
The report also underlined the correlation of an investor’s holding period to the possibility of them turning a profit. In Sydney, Melbourne, and Canberra, the fraction of loss was the highest for homes that were resold after one to three years. From the report, the average period to hold a property if you want to make a profit was at 9.9 years, while if you want to double your profit, you need to hold for about 16 years.
RP Data research analyst Cameron Kusher explains that the possibility of making a gross profit or a loss is quite different based on the amount of time a property is owned. To elaborate, properties bought before the financial crisis generally sold for a profit during last year’s December quarter, while properties purchased after that and sold during the same quarter generally were sold at a loss.
He explains, “It just reiterates the long-term nature of investing in the housing market. I think what we have seen more recently is reflective of the market going forward, so people just need to take a long-term view of buying property.” This seems to be an apt advice in this period of strong auction clearance rates as more sellers list their properties before the coming Easter slowdown.