Investor sentiment for property slips

Residential property remains the most valuable asset in Australian investors’ portfolios despite sentiment towards property falling to its lowest level in almost six years.

Investor sentiment towards direct and indirect property investment has fallen 10.2 points in the second quarter of 2011, according to The CoreData Investor Sentiment Research Report.

It now stand at -19.6 on the CoreData Investor Sentiment Index, the lowest point since the research firm started tracking it the third quarter of 2006.

Source: The CoreData Investor Sentiment Research Report

This well below overall investment sentiment, which fell by 1.7 points in the second quarter from -4.3 to -6.0, indicating that investor confidence has been shaken in recent times.

A score of zero means investors are neutral about the market, a score of 100 is extremely positive and a score of minus 100 is extremely negative.

“Property is incredibly unattractive at the moment,” CoreData principal Andrew Inwood tells Property Observer.

“Investors are only buying where there are discounted opportunities – they expect property to be cheaper in the future than now.

“They’re just buying cash. Nothing is attractive at the moment,” he says.

The third quarter of 2010 was the last positive investment sentiment quarter recorded by CoreData, a result Inwood calls “an anomaly”.

More than half (55%) of the 816 investors who took part in the study believe shares will outperform residential property in the third quarter of 2011, up from 50% who believed shares would outperform residential property in the second quarter.

Despite the pessimistic outlook, in terms of actual value, residential property still has the greatest worth among investments, while savings accounts have the least, the report has found.

However, cash appears to be king.

Around a third (29%) of investors are expected to rebalance their portfolios in favour of cash in the third quarter of 2011, up from just over 22% last quarter, while the number of investors considering Australian equities has fallen from 25% to 21%.

“Investors are clearly fragile and wary of investing as they expect the economy to slow down. It certainly looks like they will be sitting on the sidelines for some time yet,” Inwood says.