Market adjustment continues

The latest Tony Alexander/Crockers survey of property investors shows just 22% of investors are keen to buy another property, down 2% over the past two months.

This has happened at the same time as there has been a rise in the number of investors saying they are thinking of selling, up to 22% from 20%.

Independent economist Alexander says putting the two measures together gives a calculation for net buying intentions, and this gives an indication as to whether price pressures are upward or downward from the people who already own residential property investments. There has been a flattening out of concerns regarding house prices falling.

During July a net 1% of survey respondents say they plan on selling property. Alexander says this is the weakest result since the survey started and challenges feedback from other surveys suggesting interest in buying by investors is rising.

“Clearly the market is in a state of flux with high uncertainty regarding the direction of change in interest rates, availability of credit, outlook for the economy, prospects for the 2023 general election and potential tax changes, population shifts, and supply changes.

The greatest reason given by investors for selling is to fund their retirement. Alexander says this re-emphasises the long-term nature of residential property investment. The number of investors planning to never sell or hold for at least 10 years continues to track at close to 65%. A long-term focus remains dominant, says Alexander.

Types of property buying changes

Over the past two months there has been some recovery in the number of investors looking to grow their housing portfolio by carrying out a development themselves.

At the same time interest in buying an existing property remains high while there has been a noticeable decline in the number who will purchase a new property built by another developer.

Alexander says this change might reflect the flow of stories about problems for developers making existing investors more wary than usual about contracting for a new build. ”Reports of weak off-the-plan sales for developers abound.”

Investors are steering away from apartments while at the same time the sharp drop in townhouse projects by investors is a new development.

Alexander says given that so much construction is focused on townhouses and new investor caution about development viability, this result is perhaps not surprising.

For those investors looking at buying an existing property the preference for a standalone house is far greater than the preference held by those looking at buying a new build.

But unlike the sharp drop in townhouse interest from those buying new, the degree of such interest from those buying old remains little changed.

Rents

For the second month in a row, there has been a noticeable drop in the number of investors planning to raise the rents they charge over the next 12 months – easing to a record low of 65% from 70% in July and 77% in May and June.

Alexander says a factor behind the slowing pace of rent rises is that many landlords will by now have caught up on rent increases either prevented or voluntarily slowed down during the pandemic.

Landlords saying it is not easy to find good tenants has continued to worsen. A net 16%, in fact, now say it is hard. This correlates with the slowing pace of rent rises.