New Zealand property investors remain cautious
Despite some increased optimism, New Zealand property investors remain cautious, preferring to focus on consolidation rather than accumulation, according to the latest ANZ Property Investment Survey.
The survey reveals that most investors now intend to hold onto their properties for the longer term, with fewer looking to purchase more property.
Government regulations and tax changes rank as the biggest risks for 26 % of investors, double the 2010 results.
Investors were less concerned about other risks such as tenants defaulting on payments, properties remaining vacant, and property prices falling.
ANZ New Zealand general manager specialist distribution Craig Moffat says NZ property investors are showing realistic expectations in both price increases and anticipating modest rent rises.
"This suggests investors understand that the dynamics of property investing have changed.
“They are wisely managing their portfolio as a business, focusing more on achieving positive cash flow and managing risk, rather than capital gains."
The survey is against the backdrop of data showing the July NZ national median house price fell by 4.2% to $345,000 continuing the trend of hovering between $340,000 and $365,000 each month since June 2009.
The survey of NZ property investors, run in conjunction with the NZ Property Investors' Federation, received 1,800 responses.
Investors are expecting modest increases to property prices – about 2.5% over the next 12 months, and 6% to 10% over the next five years.
It sits as slightly more optimistic than last year, with 71% expecting an increase in 2011, compared with 59% in 2010.
Some 80% of investors were expecting rents to increase over the next 12 months, with an average expectation of up to 5%.
The NZ Property Investors' Federation President Andrew King said the prospect of higher rentals was a natural expectation among many investors.
"Rental prices have not kept pace with general inflation or the price of properties, so when combined with tax changes, rental increases are overdue in many cases."
The survey indicated about 40% of investors had examined their insurance cover as a result of the Canterbury earthquakes.
It indicated most continue to own the majority of their investment properties in the same region that they live.
Last year ANZ senior economist Khoon Goh noted that past NZ house price cycles had seen a downturn last for an average of 16 quarters or four years.
“This current cycle is only eight quarters long,” he advised last March.
“Given that it is coming off the biggest and longest housing boom since the 1970s, lasting 24 quarters and resulting in a 90% rise in real house prices, it would be remarkable that we can embark on a new housing market upswing from here.”
New Zealand house prices hit their peak in 2007, according to the Productivity Commission's investigation into home affordability. House prices rose 180% in real terms relative to 1990 levels through to 2007, with the largest price increases exceeding 200% in real terms and concentrated in major urban centres and holiday locations, and exceeded only by Australia, the commission report noted.
“Since the global financial crisis nominal house prices have fallen around 5%.
“House prices had risen from an average of around two and a half times personal income to five times between 1990 and 2007,” it noted.
