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Property investor survey suggests they're mostly conservative

Thursday 7th February 2019

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A survey of residential property investors shows most own a handful of properties, are relatively lowly geared and operate on a ‘buy and hold’ strategy.

The survey by Property Investor Magazine, which had more than 1,000 responses, also found only about 15 percent are negatively geared.

Just over 19 percent had loan-to-valuation ratios between 61 percent and 80 percent while more than 66 percent had LVRs below 60 percent. Almost 15 percent were debt free.

More than 61 percent said their strategy is simply to buy and hold but another almost 30 percent said they renovate to add value and then hold.

Almost 52 percent owned three properties or fewer and another 20 percent owned between four and six properties. Only 9.9 percent owned more than 10 properties.

The survey results are at odds with the Reserve Bank’s view that lending to property investors is an inherently more risky proposition than lending to owner-occupiers – the only evidence the central bank has cited to back its view is from overseas.

Nevertheless, so convinced is the Reserve Bank of the proposition that property investors are inherently more risky that it has used that to justify imposing greater LVR restrictions on property investors than on owner-occupiers.

“LVR lending restrictions are tighter for investor loans due to the higher risks associated with this type of loan,” the central bank’s website says.

The survey results were skewed to the top of the North Island, showing 41.5 percent of respondents own property in Auckland, 14.6 percent in the Waikato and nearly 14.2 percent in the Bay of Plenty.

Another 14.3 percent own properties in Canterbury and 13.5 percent in Wellington.

Of those who had sold an investment property, only 14.4 percent had done so within the past year. Another 8.85 percent had sold between one and two years ago and 44 percent had never sold.

Their reasons for selling varied, with wanting to invest elsewhere being the most frequent, cited by 14.5 percent. That was followed by the 9.2 percent looking to realise a capital gain while 8.8 percent sold because the property wasn’t performing.

With all the changes to property investment rules brought in by both the previous National Party-led government and the current Labour-led government, one might have expected concern about legislative changes might have played a bigger part in the decision to sell but only 6.6 percent cited government policy as a reason.

Nevertheless, when asked what the three big issues for residential property investors this year will be, a whopping 91 percent cited government policy changes.

The next most cited issue - a distant second at 43 percent - was concern at low yields. Almost 36 percent worried about finding good tenants.

Asked to identify the biggest barriers to growing their portfolios in the next 12 months, almost 65 percent cited government policy changes. Almost 32 percent were concerned about lack of yield and just over 29 percent cited banks’ credit policy.


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