Property investors still prospecting, but Perth's off the table

Sentiment towards property investment remains surprisingly strong, though potential investors are steering clear of Perth, according to a new survey.

Nearly two-thirds (59%) of the 2,200 investors and home buyers surveyed by Metropole Property Investment plan to buy an investment property over the next year.

Although Perth is the epicentre of the mining boom, investors appear unwilling to speculate on the WA capital, with only 9% expecting it to show good capital growth over the next two years.

According to Michael Yardney, founder of Metropole, investors are responding to the current poor market sentiment and are not willing to think long term.

“Perth has shown the least growth over the past 12 months. Investors are only interested in what has recently happened as opposed to what might happen in the future,” Yardney says.

“Most people miss the bottom of the market because they are waiting for the good news. They want certainty and comfort. There are too many mixed messages coming out of the market – they don’t want to speculate.”

According to ABS June quarter statistics, the values of established houses in Perth have dropped by 4.1% compared with the same quarter in 2010, the biggest drop of all capital city markets.

Seasonally adjusted data for June, released by RP Data-Rismark, shows the Perth housing market down 4.7% on the year, with a median price of $461,000.

Brisbane house prices are down by an even greater amount over this period, according to RP Data-Rismark (6.3%).

However, Metropole survey respondents are more optimistic about Queensland’s capital city, with 16% choosing it as the best place to invest.

Current market sentiment did not appear to factor in the minds of respondents when it came to Melbourne and Sydney.

The currently flat Sydney market is still seen as a safe bet by more than a quarter (28%) of respondents, while Melbourne came in a close second with 23% of the vote.

Melbourne was rated the weakest-performing capital city in the June quarter by RP Data-Rismark, with values down 2% compared with the same time last year. A similar decline was recorded in the ABS June quarter results.

Only 5% of respondents expect Adelaide property values to grow strongly over the next two years, with mining towns and regional towns equally unpopular.

Alongside the positive outlook for property investment, nearly a fifth of respondents plan to buy a new home in the next year.

The positive findings about property investment come despite 43% of respondents expecting property prices to fall over the next year, compared with only 27% who expected prices to fall when surveyed six months ago.

Yardney says the message from the survey is that despite all the negative message sentiment, many Australians are still keen to take advantage of the current market and buy their first homes, upgrade their current homes or buy investment properties. 

“And they’re willing to make sacrifices to ensure this happens.” 

The biggest concern of investors and buyers is obtaining finance, though this has fallen from 33% six months ago to 28% followed by economic uncertainty and negative cash flow. 

Metropole respondents said they were willing to make major lifestyle sacrifices (food, alcohol, day to day spending, buying a cheaper property) to get onto the property ladder, which concurs with the results of a survey by Mortgage Choice in July.