Investors returning to the market

With steady house prices, higher rental incomes and rental demands, this year is shaping up to be the year of the investor.

Almost eight in 10 investors (77 per cent) see 2011 as a good time to purchase an investment property, according to a nationwide study carried out by Bankwest and the Mortgage and Finance Association (MFAA).

MFAA’s CEO Phil Naylor said there were some factors emerging which are key to investors looking to make a return to the market.

“Despite a few cash rate rises throughout 2010, there are encouraging signs for investors in the property market,” Mr Naylor said.

“Rents have increased and vacancy rates are low. These are the type of signals investors look for in their property decisions.”

“We are seeing savvy investors come back into the market as a long term investment strategy that’s underpinned by expectations of income growth.”

The latest Bankwest/Mortgage and Finance Association (MFAA) Home Finance Index also revealed that only one in three Australians (38 percent) expect property prices to rise in coming quarter, down from more than three quarters of respondents (79 percent) in March 2010.

According to the study, Victorians are the most optimistic about property prices with 46 percent anticipating higher prices, followed by South Australia (45 percent). Queenslanders are the least optimistic with just 22 percent anticipating prices to rise.

Bankwest’s Head of Specialist Banking Ian Rakhit said consumers are also still wary of higher interest rates and 85 percent of respondents expect rate rises in the coming year.

“Australians are more pessimistic of capital growth and will start 2011 expecting steadier rather than rising prices,” he said. “Part of this is clearly driven by their expectations of higher interest rates in 2011.”

The poll also found that generally households found their current financial situation steady compared to a year ago. This was the first time in more than three years that households have not reported deterioration in their financial situation.

Mr Baylor said: “The fact that households no longer see their financial situation going backwards is an important development for the housing and mortgage market. This should provide a solid base for activity in the next 12 months.”

*The survey polled more than 1,100 people across Australia and is the eighth Index taken since 2004.