Property investor survey suggests they're mostly conservative

A survey suggests Kiwi property investors may be more conservative than the Reserve Bank thinks. Photo/Dean Purcell.

A survey of residential property investors shows most own a handful of properties, are relatively lowly geared and operate on a 'buy and hold' strategy.

The survey by Property Investor Magazine, which had more than 1,000 responses, also found only about 15 per cent are negatively geared.

Just over 19 per cent had loan-to-valuation ratios between 61 per cent and 80 per cent while more than 66 per cent had LVRs below 60 per cent. Almost 15 per cent were debt free.

More than 61 per cent said their strategy is simply to buy and hold but another almost 30 per cent said they renovate to add value and then hold.

Almost 52 per cent owned three properties or fewer and another 20 per cent owned between four and six properties. Only 9.9 per cent owned more than 10 properties.

The survey results are at odds with the Reserve Bank's view that lending to property investors is an inherently more risky proposition than lending to owner-occupiers – the only evidence the central bank has cited to back its view is from overseas.

Nevertheless, so convinced is the Reserve Bank of the proposition that property investors are inherently more risky that it has used that to justify imposing greater LVR restrictions on property investors than on owner-occupiers.

"LVR lending restrictions are tighter for investor loans due to the higher risks associated with this type of loan," the central bank's website says.

The survey results were skewed to the top of the North Island, showing 41.5 per cent of respondents own property in Auckland, 14.6 per cent in the Waikato and nearly 14.2 per cent in the Bay of Plenty.

Another 14.3 per cent own properties in Canterbury and 13.5 per cent in Wellington.

Of those who had sold an investment property, only 14.4 per cent had done so within the past year.

Another 8.85 per cent had sold between one and two years ago and 44 per cent had never sold.

Their reasons for selling varied, with wanting to invest elsewhere being the most frequent, cited by 14.5 per cent. That was followed by the 9.2 per cent looking to realise a capital gain while 8.8 per cent sold because the property wasn't performing.

With all the changes to property investment rules brought in by both the previous National Party-led government and the current Labour-led government, one might have expected concern about legislative changes might have played a bigger part in the decision to sell but only 6.6 per cent cited government policy as a reason.

Nevertheless, when asked what the three big issues for residential property investors this year will be, a whopping 91 per cent cited government policy changes.

The next most cited issue - a distant second at 43 per cent - was concern at low yields. Almost 36 per cent worried about finding good tenants.

Asked to identify the biggest barriers to growing their portfolios in the next 12 months, almost 65 per cent cited government policy changes. Almost 32 per cent were concerned about lack of yield and just over 29 per cent cited banks' credit policy.

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