Property investors play it safe

Government regulations and tax changes are now considered the biggest property investment issue.

A range of others are acknowledged in the latest ANZ Property Investment Survey but the reported impact on investors has decreased this year.

Tenants defaulting on payments, properties remaining vacant and property prices falling are less prevalent decision making factors in the cautious approach investors are taking by focusing on consolidation rather than growth.

The survey of 1,800 respondents shows investors now intend to hold onto their properties for the longer term, with fewer looking to add to their assets.

ANZ distribution general manager Craig Moffat said property investors were showing realistic expectations of 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.”

Around 26% of investors had increased their rents this year.

Investors are expecting modest increases to property prices – around 2.5 % over the next 12 months, and 6-10 % over the next five years, a more optimistic outlook than last year.

Eighty per cent of investors reported an expectation of rent increases over the next 12 months, and 98 % expect one over the next 5 years.

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.”

Owning a family trust is now less common due to an increase in using a Look Through Company.

“Investors are clearly reviewing the most appropriate ownership structure in an evolving environment.

“With increases in rental prices and the withdrawal of building depreciation, I would have thought more owners would have chosen Qualifying Companies as an appropriate structure for their rental properties.”

This survey also reveals that almost 40% of investors have examined their insurance cover as a result of the Canterbury earthquakes.