Key factors that influence property buying
Monday 1 November 2004
Press Release: Hybrid Property Consulting
By The LandlordProperty Investors: Survey reveals key factors that influence property buying decisions.
The Reserve Bank has raised its official cash rate five times this year from 5% to 6.25% and economists expect a further interest rate increase this week and maybe another in December. So will this mean a sudden mass exodus from the residential property investment market?
Surprisingly, this is not the case according to a survey of property investors by residential property consultants, Hybrid Group.
The majority of respondents had a long term strategy and in spite of increasing interest rates over 87% have the intention of buying more investment properties in the next year.
The great kiwi DIY spirit prevails amongst property investors too – 62% answered that they will buy a specific type of property in an area they know intimately or through their own research. The Quotable Value House Price Index (QVHPI) remains the most trusted source of actual house price growth. 46% said that they trust the QVHPI most. 33% would rely on Median house prices, while only 21% would rely on Average house prices.
An interesting comment about the accuracy of median house prices by well known property commentator Mary Holm was published recently in the NZ Herald (3rd of July, 2004) when she stated: “Median prices aren’t perfect but they’re the best we’ve got”.
Ulf Schoefisch – Deutshe Bank chief economist pointed out that medians were subject to “compositional factors” when asked recently about increasing median house price movements by Anne Gibson – (New Zealand Herald August 17th , 2004) and he stated that “We expect the Quotable Value (House) Price Index which is not influenced by compositional factors to record a continued fall... ”
And when asked, by the Hybrid Group, Tony Alexander Chief Economist BNZ Bank had this to say about median prices. “Median house prices give a reasonable indication of house price movements at a national level but at a regional level they are not very useful and at a suburban level they are completely useless due to their potential to give an inaccurate representation of house prices and house price trends.”
Some of the findings of this survey are not surprising to Kieran Trass, director of Hybrid Group and author of the book “Grow Rich with the Property Cycle” because the survey confirms most property investors have a long term wealth creation strategy to help provide for their retirement. What is surprising is the number of investors who trust the unreliable median and average house price figures as the most accurate measure of actual house price growth rather than the much more accurate Quotable Value House Price Index.
The quality of respondents to the Hybrid Group survey can be illustrated by the following facts:
The survey consisted of a total of 451 respondents.
50% of respondents currently own 3 or more properties,
15% - two,
19% - one,
16% - had none.
44% have a “Buy and hold long term (10+ years)” investment strategy
32 % have a “Buy, do-up and hold long term, but occasionally sell” strategy
Only 4% have a short term investment strategy
Over 87% of respondents indicated they would buy their next property within the next year, and of those 52% would buy in the next 6 months, 25% within 3 months and 11% within just 1 month
32% are convinced property prices will increase over the next 3 years, 44% stated that prices would stay where they are 24% thought prices will decrease
If expected capital growth in an area is greater then 10% in the next year - more then half the respondents (56%) would buy an investment property in that area.
Typical comments from respondents included: “I'll look at predictions for growth in an area and try to buy as close to the central city as possible.” “Look for areas with good and growing infrastructure with limited room for new housing”.
More “decision influencers“ can be found here: www.propertyhotspots.co.nz
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