Media Release

Monday 7 October, 2013

Confident investors wary of new regulations

Residential property investors are confident about the property market but wary of the possible impact of new regulations, according to the 2013 ANZ Property Investment Survey released today.

The survey shows 92% of investors expect property values to go up the next year, with the median increase expected around 4.3%. Ninety-eight per cent of investors expect increases over five years.

Risks such as tenants defaulting, properties remaining vacant and not meeting expected returns are seen as less important than in previous years.

Craig Moffat, ANZ’s General Manager Specialist Distribution, said the responses underlined the importance of property investors being realistic, taking a long-term view and managing potential risk.

“Investors see property as a long-term investment, with almost nine in 10 planning to hold on to their properties for the long term, and accordingly they have to pay attention to business fundamentals and cash flow management.

“Managing potential risks is always important, and the risk of interest rate increases is up from 18% last year to 28% this year. But the main risk perceived by investors is overwhelmingly government regulation and tax changes.” Investors’ response to Reserve Bank restrictions on high LVR lending was very much “wait and see”, said Mr Moffat. “The survey was conducted just before the Reserve Bank announcement, but it had been widely signalled. What we were seeing is a high degree of uncertainty among investors with 84% saying they don’t know what it will mean for them. Only 16% thought it would impact their strategy.” Debt ratios are about the same as last year with only 8% of investors having LVRs over 90% and less than a quarter having LVRs over 75%. One in 10 investors are totally debt-free.

2013 ANZ Property Investment Survey – key findings • 92% expect property values to go up in the next 12 months (compared with 87% last year, with the median increase at 4.3% versus a median 3.1% increase expected last year) • 86% of investors are expecting annual rental growth, with the median expectation of 2.5% unchanged from last year. Rents were not expected to keep pace with property values, with a median expectation of 6.2% rental growth over the next 5 years.

• 61% plan to buy another property at some stage, with 49% intending to buy another property within two years.

• 48% see government regulations and tax changes as the main risks to property investors (up from 37% in 2012). This may also be capturing the Reserve Bank’s new macroprudential policy initiatives limiting high-LVR lending.

• The proportion identifying interest rate volatility as a key risk is up from 18% last year to 28% this year.

• Investors expressed a high degree of uncertainty about LVR changes, with 84% saying they don’t know what it will mean for them. Only 16% think it will impact their investment strategy. Note: the survey was conducted just prior to the RBNZ announcement • Around half of investors do not believe LVR changes will affect their value of their properties. 23% think it will affect the value of their properties – though by no means all thought the impact would be negative – with lower-end suburban houses being most (negatively) affected.

• The proportion identifying increased insurance premiums as a key risk was also up, at 37%, compared with 23% last year. This likely reflects the move to fixed value insurance policies, which has resulted in higher premiums for most.

• Just under half (46%) of Canterbury property investors said the quakes had made them reassess the attractiveness of being a property investor, versus 28% nationwide.

• 61% of investors this year (48% in 2012) say they have examined their insurance cover as a result of the Christchurch earthquakes. This may partly reflect an element of compulsion from the move to fixed value cover policies by most insurers.

The annual survey of property investors throughout New Zealand, run in conjunction with the NZ Property Investors’ Federation, asked about issues affecting the residential property market and where investors see the sector heading over the next year.

ENDS