Kiwis lose interest in investment properties

[essence]

18/08/2010

an annual property survey shows the number of new zealanders interested in investing in residential property has declined significantly, for the first time in several years.

The nielsen real estate market report, an online survey sponsored by realestate.co.nz, found that last year one in four of those surveyed said they intended buying residential property as a future investment.

Now just one in seven have the same intention - the lowest level in the history of the survey.

Specialist property lawyer at simpson grierson greg towers said there had been a measurable decline in the number of transactions involving the traditional property investors.

"this is unlikely to change until there is uplift in the general economy and a greater degree of confidence shown in the property market by all parties."

investors were now tending to hold on to property rather than sell.

Realestate.co.nz chief executive alistair helm said the survey highlighted caution around the market.

"holders of investment property showed a 42 percent decline in intention to sell, which is a huge decline.

"as a result, there is likelihood that those investors still looking to find value will target private sellers who they perceive to offer better deals in this type of 'buyer's market'."

in a year, there had been a 24 percent increase of intention by property investors to seek out private sellers.

The survey represented the first published data since the announcement of tax changes to property investment announced in may's budget.

[Alistair Helm]

Access to full details

Just wanted to provide a link to the full details of this section of the research posted on Unconditional today

[One]

The Nielsen Real Estate Market Report is based on a website-intercept survey on New Zealand real estate websites conducted during May and June 2010 with a sample size of 1,225 respondents and a margin of error of 2.86%.

So ... it was filled out by people who were visiting a real estate website and took the time to bother filling out the survey?

That doesn't sound like a representative sample to me!

How on earth can that be extrapolated to say anything at all about investors in general?

[Alistair Helm]

Another key statistic of the survey is that in the past week 80% of all respondents identified specialist real estate websites as the source of real estate information. This compares to just 25% of the sample identifying newspapers for real estate information.

The web is now a very legitimate medium for all research, given the fact that close to 90% of the population have access to the web. The survey is undertaken by Nielsen and the scale of the survey makes the results relevant for statistical analysis.

Would you judge a 1,200 sample telephone survey any more accurately or a mail in survey. The people completing the survey were pre-qualified - they were actually on a real estate website and therefore they have an interest in real estate.

[muppet]

Falling prices paralyse investment in property

By Anne Gibson
5:30 AM Thursday Aug 19, 2010
Photo / Greg Bowker


People are less keen to become landlords and landlords are more wary of selling because of falling house prices, a survey suggests.
A year ago, one in four people intended to buy rental housing, but now one in seven has this goal.
The Nielsen online survey for realestate.co.nz found the appetite for rental housing had dropped in the past 12 months.
The survey also showed a 42 per cent fall in the intention of landlords to sell.
An online website yesterday listed 15,997 Auckland properties for sale and 4190 houses and flats in Auckland available to rent.
NZIER economist Shamubeel Eaqub said the housing market was extremely depressed and low sales volumes suggested a sombre outlook.
"Housing as an investment is less alluring than in recent years," he said.
"House prices have been largely flat for two years, compared to prices increasing by an average of 8 per cent annually in the previous decade. In this period rental properties made good investments despite very low rental yields.
"House prices are now very expensive relative to incomes. Affordability for owner-occupiers is poor ... We do not expect a great flood of owner-occupier buyers to enter the market unless prices fall.
"For investors ... current rents do not stack up. Either rents have to go up or house prices have to fall," he said. "We do not believe there is much room for significant rental increases. Instead, frothy house prices may adjust lower."
Greg Towers, a specialist property lawyer and partner at Simpson Grierson, said the figures confirmed a decline in the number of deals by traditional property investors.
"This is unlikely to change until there is uplift in the general economy and a greater degree of confidence shown in the property market by all parties," he said.
"There is now a very clear intention among investors who own property to hold rather than sell, which is a clear indicator of why the property market in general has slowed significantly."
Barfoot & Thompson's rental statistics showed a rise in the past month. Rents are rising in Auckland as landlords try to recoup higher costs, the real estate agency says.
Its average weekly rent reached a new high, rising by $5 to $408 last month. This is $20 a week higher than for July last year, which at $388 was the 2008/09 average.
THE NUMBERS
* More than 1 million people rent. * NZ has 1,651,452 houses. * They are worth $500 billion-plus. * 550,000 houses are rented. * 69,000 are rented out by Housing NZ. * $408/week average Auckland rent. * $388/week 2009 Auckland average.
Sources: Census 06, Real Estate Institute, Housing NZ, Barfoot & Thompson

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10667177

[graemeh]

Another key statistic of the survey is that in the past week 80% of all respondents identified specialist real estate websites as the source of real estate information. This compares to just 25% of the sample identifying newspapers for real estate information.

The web is now a very legitimate medium for all research, given the fact that close to 90% of the population have access to the web. The survey is undertaken by Nielsen and the scale of the survey makes the results relevant for statistical analysis.

Would you judge a 1,200 sample telephone survey any more accurately or a mail in survey. The people completing the survey were pre-qualified - they were actually on a real estate website and therefore they have an interest in real estate.

No, the research is rubbish. The problem here is bias in the selection of survey participants.

It's no better than if they surveyed everyone walking into the local LJ Hooker agent's office and asked questions like "Who do you consider the top local real estate agency?"

The "old school" way of selecting survey participants was to drill a hole through the phone book. I'm not sure how you'd do it today but definitely not by surveying visitors to a website.

[Alistair Helm]

OK - you question the research sample.

The survey has been done for 4 straight years in a row - the survey methodology is consistent over these years. So if you believe that there is a bias then accepted.

The report is all about the trend - that trend is statistically valid - supported by Nielsen, a credible professional research company.

[One]

The research is completely valid IF AND ONLY IF you realise it's about investors who are currently interested in real estate (and were prepared to fill out the survey). It's very interesting that the purchasing intentions of that group have changed - but it says NOTHING about whether the purchasing intentions of all NZ investors have changed.

I expect Nielsen's don't generalise the findings. As you say, they're a credible firm.

Alistair, I gather you're the person who commissioned the research? If so, I'd really recommend you talk to Nielsen's about interpretation of the results before you put out next year's press release.

The blog entry you pointed us to above certainly implies that the results apply to all investors. I didn't start seeing red flags till I read the small print about the sampling method, and that only raised red flags because I know what a "website-intercept survey" is.

By the way, my job involves doing some statistical analysis. I'm not as knowledgable as I'd expect someone at Nielsen's to be, but I do have a reasonable idea what I'm talking about.

[One]

Another key statistic of the survey is that in the past week 80% of all respondents identified specialist real estate websites as the source of real estate information. This compares to just 25% of the sample identifying newspapers for real estate information.

And again, be careful with your interpretation here.

80% of the people who visited a realestate website and filled out a survey identified specialist real estate websites as the source of real estate information.

I'm surprised it wasn't 100%!

If you'd instead surveyed, say, 1000 newspaper subscribers, you might have got a totally different result.

[Alistair Helm]

The survey is a Nielsen survey - Realestate.co.nz did not commission it, we simply sponsor it. It is a syndicated industry survey.

The analysis of intention to purchase an investment property is not of a sample of investors, it is of the segment of the total respondents (1,225) who stated that they were at that time looking to buy a property - therefore they were not classifying themselves as investors.

I am aware of the interpretation - however I concede that I may not have been as specific in the second quoted stats so let me be very specific.

Of the total sample (1,225) who responded to the survey for which the completion rate was 26%. When asked to identify from a presented list of 15 options those media which they had used in the past week to research real estate, 80% of that group identified specialist real estate websites amongst other sources of media (an average of 4.1 different media were selected from the list of 15). In comparison just 25% of the sample identified metro newspapers (print and online editions) as being a source of media they used for researching real estate in the past week.

Specialist real estate websites was the most frequently identified media followed by company websites.

[donna]

.

Would you judge a 1,200 sample telephone survey any more accurately or a mail in survey. The people completing the survey were pre-qualified - they were actually on a real estate website and therefore they have an interest in real estate.

Would have made more sense to run the survey on here - IMHO given this is a dedicated social networking site for property investors.

Cheers,

Donna

[Alistair Helm]

Donna - I appreciate your suggestion, however the survey was not of the behaviour an attitude of property investors. The sample was to be of people who in general are people as a representative group of the whole population are looking to buy or sell property at this time.

[cube]

When it came to asking about buying intentions of the 1,225 survey respondents, it showed that their intention to buy an investment property had slumped by 40% in a year. Last year 1 in 4 of all those surveyed said that their intention was to buy an investment property. Just 12 months later when this survey was undertaken in May/June of this year that intention had slumped to just 1 in 7 – just 15%; the lowest level seen in the past 4 years of this annual survey.

So what is shows is that the number of people visiting the website and intending to buy an investment property has dropped.

This is consistent with the market activity, that investors are not particularly active, and that most market activity is being generated by home buyers (which also helps to explain why prices are holding up in the face of decreased buyer activity).

So, does a decrease on investor activity indicate that "Kiwis lose interest in investment properties" - I don't necessarily think so.

[Bluekiwi]

This slow down is fantastic for me.
I bought 4 properties in 2009 value around 1.5 Million.

I cant buy anymore at the moment
I was sad as I though the market might leap ahead before I could buy anymore.

Now I know I have the next 12 to 24 months to prepare to buy more properties before prices take off again.

Fantastic news.

Hopefully I can get 2 or 3 more holds under my belt while the property market is in limbo.

Have I lost interest in property, hell no, but I can take my time more.
I am thinking 10 to 20 years for my long term hold strategy.

I have always worked on 15 years for prices to double and not 10, and if it takes 20 I am still happy.

If you are in a cash flow nuetral position, or can support whatever negative gearing you have through other income, then its still a wonderful game.

I dont think there is a loss of interest, but there is a change in tactics.

Maybe there is some loss in interest from the undeducated speculators, lured in by the negative geared big quick cap gains.
And while that will negatively affect prices it will reduce the chance of bubbles and the problems that brings.
And bring normal long term hold investors a more steady and cash flow secure environment.

[SwissKiwi]

And while that will negatively affect prices it will reduce the chance of bubbles and the problems that brings.
And bring normal long term hold investors a more steady and cash flow secure environment.

Right - the current inclination towards deleveraging means the eventual upturn will be more sustainable and on a more solid basis.