Tighter lending biggest concern for property investment professionals
Property investment professionals are overwhelmingly positive about the year ahead, but tighter lending conditions remain a concern, according the 2018 PIPA Member Survey.
The annual survey, conducted in February, found that 100 per cent of respondents were optimistic about their businesses with more than half saying they would employ more staff this year.
However, the number one property market concern was the tightening of lending to investors.
Over the past 12 to 18 months, all investors have had to deal with the APRA restrictions, which lenders have faithfully implemented.
The issue was that the restrictions were applied nationally when it was only speculative investing in mainly Sydney that seemed to be a temporary problem.
Smart investors in places like Adelaide and Brisbane were hit with higher interest rates on long-standing interest-only loans when their markets were firing on one or two cylinders at best at the time.
While stricter conditions have taken the heat out of the Sydney market, which was needed, we can only hope that they’re relaxed somewhat so not all investors are caught by a situation they have nothing to do with in the first place.
The second most concerning property market issue for survey respondents is the potential for changes to, or even the removal of, negative gearing.
With Sydney's market contracting, it will be interesting to see whether negative gearing remains a political football in the lead-up to the next election.
The next two concerns are rising interest rates and property spruikers.
While there's not much anyone can do about increasing rates, it certainly doesn't seem like they'll be heading into seven per cent territory anytime soon.
Property spruikers always rear their heads during hot markets and unfortunately some uneducated buyers and investors may be caught out – especially in oversupplied new unit markets.
In fact, nearly 90 per cent of survey respondents believed that Australian consumers needed a more comprehensive education program for property investment.
When it came to their businesses, survey respondents were most concerned with a reduction in positive property sentiment followed by a decline in investment activity and general economic uncertainty.
There’s no doubt that the property market has changed from last year but that is not necessarily a bad thing.
Sydney’s market is cooling and will likely stay flat for the short- to medium-term as it usually does.
The Melbourne market is showing signs of slowing, but its strong economy and robust population growth will keep prices buoyant.
Brisbane is tipped for growth this year, however, that has been the prediction for a couple of years now.
The truth is we’ll need to see some economic improvement before Brisbane’s market produces anything spectacular in my opinion.
Adelaide is also strengthening, mainly due to its affordability, but it also has a healthy infrastructure program under way, too.
Some pundits are picking Perth, but I’m not sure how long it will take for this market to record solid positive growth.
A lot can change in 12 months, so it will be interesting to see how our capital city markets are faring by the end of the year.
In the meantime, PIPA will continue to lobby government for legislation in the property investment advice space so that consumers have protection against fly-by-night spruikers masquerading as bona fide property experts.