2011 First Time Property Investors Survey: QLD results

Flying solo, tenants, type, interest rates, sacrifices, concerns & more

 

Australia’s largest independently-owned mortgage broker has found that of the Queenslanders who will buy their first investment property in the next two years, for 13% it is their first ever property purchase. This compared to a 19% national average.

Of the 211 respondents to the Mortgage Choice 2011 QLD First Time Property Investors Survey*, all of whom were buying before July 2013, more than one in four intended to do so on their own. In fact, Queenslanders were the most likely of any state to fly solo.

The number one motivator to buy was ‘I want to set myself up for financially for the future’ (80%), then ‘I see more benefit in investments such as property than in I do shares’ (60%). ‘Tax benefits’ ran third (57%), followed by ‘I’ve researched the market and feel property investment will enable me to achieve my financial goals sooner/better’ (45%) and ‘to diversify my asset portfolio’ (42%).

 The biggest concerns for the next 12 months for these upcoming QLD investors were:

1. 1.    Costs of living such as clothing, utility bills, etc – 25% of respondents.
2. 2.    Interest rates – 23%.
3. 3.    Economic management at Federal Government level – 20%.
4. 4.    Economic management at State Government level – 7% - the most of any state.
5. 5.    Job security – 7%.

While 13% did not plan to add to their investment property portfolio after this purchase (the least of any state), 23% planned to purchase as many as possible (most of any state).

Once we’d delved into the results, the description that came to mind for these first time property investors was logical, well-planned, long term thinkers who were determined, careful researchers and aware of their limitations. 

This may be why so many are buying for investment purposes before becoming a home owner.

 The findings show these novice investment buyers to be almost the opposite. They are making educated choices based on a long term commitment to their property cause and are thinking with their heads rather than hearts. All are vital attributes of a successful investor.

For example, 83% already knew how much of an interest rate buffer they were going to factor into their repayment budget and only 1% weren’t putting in a buffer. Also, 42% were looking to hold onto the property for 10 years or longer and 46% were looking at five to 10 years.

58% of respondents owned their first home also and 29% had owned more than one home before.

 

Other key results

• 45% were not concerned by falling property prices and 43% were only a little bothered.
• 27% will purchase alone, 67% will buy with a partner and 5% will buy with family.
• Most common finance strategy was borrowing the full purchase price using home equity.
• 32% will use a mortgage broker for the purchase and 51% might.
• 67% will make, or are already making, lifestyle sacrifices in order to buy.
• Favourite property type was a small house of one to three bedrooms.
• Top two property features were tenant demand and population growth in the area.

 

Property location and characteristics

Unsurprisingly, 94% of QLD respondents chose QLD as their investment location. NSW was second most popular, with 3%, then VIC with 2%. QLD residents were the most loyal to their state, while NSW residents were the least. 10% of those respondents were buying elsewhere.

 

When asked for their top five desired property features, QLD respondents ranked them as follows:

1. 1.    Tenant demand in the area – 58% of respondents.
2. 2.    Population growth in the area – 56% - the most of any state.
3. 3.    Infrastructure going into the area – 55% - the most of any state.
4. 4.    In the right suburb and street – 55%.
5. 5.    Locality to amenities and entertainment – 54%.
6. 6.    If it needs repairs, renovations or regular maintenance – 42%.
7. 7.    Size of rooms and functionality of layout – 37%.
8. 8.    Ability to renovate to add value – 34%.
9. 9.    Suitability of property to desired tenants – 28% - the least of any state.

10.  Aspect, ie. not looking into neighbour, views, direction, window placements, etc – 16%.

 

I’m surprised the property’s potential to add value through renovation didn’t rank higher. Its suitability for renting out easily is a clear winner over easy short-term capital growth. The focus is getting tenants into a well-located property in a popular area with solid growth prospects.

 

Owning land was crucial for QLD respondents. A house of up to three bedrooms ranked first (39%) and a house with four or more bedrooms ranked second (24%). The latter was the second highest proportion of respondents for any state apart from WA. The third most appealing property type was a unit/apartment of up to two bedrooms (15%) then a unit/apartment with three or more (8%).

 

Lifestyle sacrifices

As opposed to the 87% of Mortgage Choice’s February 2011 QLD Future First Homebuyers Survey respondents who said they will or were making lifestyle sacrifices to purchase within two years, only 67% of the 2011 QLD First Time Property Investors Survey’s respondents intended to.

 

The top 10 most common sacrifices were:

1. 1.    Cut back on general day to day spending – 68% of respondents.
2. 2.    Eat out less and cut back on take away food – 68% - the most of any state.
3. 3.    Miss out on a holiday – 46%.
4. 4.    Delay a vehicle purchase – 38% - the most of any state.
5. 5.    Cut back on alcohol related spending – 36% - the most of any state.
6. 6.    Remain in my current job rather than move on – 27% - the most of any state.
7. 7.    Rent out one or more rooms in my home to cut costs – 18% - the most of any state.
8. 8.    Purchase a less expensive property than desired – 15% - the least of any state.
9. 8.    Change jobs for a higher income – 15%.
10. 8.    Quit smoking – 15% - the most of any state.

 

It’s interesting to note what an impact property investment plans have on Queensland employment trends, with at least one in four respondents having already or intending to stick with or change their job situation due to the impending purchase.

 

The same goes for their health situation. To move into a better financial position to purchase, the majority are cutting back on richer and/or fattier foods, and a large number are doing so on alcohol related expenses. Even better, more than one in seven respondents have or will quit smoking. I wonder how many Australians live a healthier life due to buying property.

 

Purchase and tenant details

27% planned to take the leap alone, versus 29% in the 2011 QLD Future First Homebuyers Survey. 67% will buy with a partner (versus 65%) and 5% with family (1%). QLD was the only state to have no respondents buying with friends, compared to a 2% national average.

 

A significant number were getting friends and family involved as tenants. Although most - 87% - planned to rent out the property to an unknown person, 4% were becoming a landlord to their friends, 2% to their children and 1% to parents and other family. 4% will make it their holiday home.

 

Interest rate buffers and concerns

When asked what interest rate rise they could handle before giving up on buying, the results were:

• 8% of respondents would give up if rates rose between 0.25% and 0.5%.
• 8% would give up at a rise of 0.5% or more.
• 14% would give up at a rise of 1% or more.
• 15% would give up at a rise of 1.5% or more.
• 25% would give up at a rise of 2% or more.
• 10% would give up at a rise of 3% or more.
• 7% would give up at a rise of 4% or more.
• 8% would give up at a rise of over 5%.
• A lucky 6% said they could manage any interest rate rise.

 

With interest rate rises a regular discussion point at the Australian dinner table, it was prudent to ask about the effect these would have on future first time investors’ plans.

 

It’s great to see 6% could handle any rate increases but concerning to find 16% would give up on buying their first investment property once rates rose by half a percentage point. I hope anyone who can’t handle an interest rate rise of at least one to two percentage points thinks carefully about entering the market at all, unless they intend to fix their interest rate for some time or are sure they will be in a better financial position once the purchase process moves into full swing.

 

When it came to the interest rate buffer these buyers would put on top of their repayments, the five most popular (apart from ‘I don’t know’, at 17%) were:

1. Between 2% and 3% – 26% of respondents.
2. Between 3% and 4% – 14%.
3. Between 1.5% and 2% – 11%.
4. Between 1% and 1.5% – 10%.
5. Between 4% and 5% – 7%.

 

* Ticketek Insights ran the independent survey from 17 to 24 June 2011, asking a range of questions to 1,060 Australians, all of whom were purchasing their first investment property in the next two years. Respondents were evenly split between male and female while 28% were Generation Y, 45% Generation X, 27% Baby Boomers and less than 1% were Builders. For the purposes of this survey, Gen Y is born between 1980 to 1994, Gen X between 1965 and 1979, Baby Boomers between 1946 to 1964 and Builders between 1925 to 1945. Each major state (NSW, VIC, QLD, SA and WA) had just over 200 respondents while NT and TAS were not used in state-based comparisons due to their small number of respondents.

About Mortgage Choice

 

Australia’s largest independently-owned mortgage broker, Mortgage Choice has sourced a home loan for well over 300,000 people since 1992. It works with all manner of property finance borrowers via hundreds of franchises.

 

The company writes one in every 25 home loans in Australia by providing professional guidance on, and choice of, products offered by an extensive panel of leading lenders. Many of its brokers provide a broader service, helping customers source commercial and personal loans, asset finance, deposit bonds and risk and general insurances.

 

Uniquely, Mortgage Choice pays its franchisees the same commission rate for home loans they write, regardless of rate paid by the lender a new customer selects, working in the customer’s best interests to tailor a solution to them.

 

The company has no balance sheet or funding risk, and consistently delivers strong profits and attractive yields. It listed on the ASX in 2004 (MOC) and is a member of the Mortgage & Finance Association of Australia (MFAA).

 

Recent recognition: No.1 on The Adviser magazine’s 2011, 2010 and 2009 Top 25 Brokerages lists; 2011, 2010, 2009 and 2008 10 Thousand FEET Top 10 Franchise list; 2010, 2009, 2008, 2006 and 2005 MFAA Awards Retail Aggregator/Originator of the Year; 2010 Forbes Asia-Pacific Best Under A Billion list.

 

Mortgage Choice holds an Australian Credit Licence: no. 382869, issued by ASIC.