Property investors' confidence firm despite warnings

Property investors are ignoring talk of a housing bubble and are still confident that prices will continue to rise.

Only 2 per cent of 453 respondents in the annual ANZ Bank's property investor survey expected prices to fall in the next year, and only 1 per cent expected a fall over five years. This is despite warnings from the Reserve Bank and economists that the housing market is overheated. Property investors expect the good times to continue, with median price rises of 5 per cent in the year ahead, 7.5 per cent over the next five years and 10 per cent over the next decade.

"It is precisely this sort of exuberance that the Reserve Bank is seeking to quell," ANZ Bank chief economist Cameron Bagrie said. Half of those surveyed expected to buy another investment property in the next year, and only 17 per cent were not expecting to buy in the next five years. This was despite a continued erosion of yield - the return on property investors' capital - running at 4.5 per cent. There were clouds on the horizon for property investors in the form of a proposed clampdown on tax rules that favoured investors, Bagrie said.

New Zealand Property Investors Federation chairman Martin Evans said wise investors held off purchasing when the housing cycle was peaking.

There would be plenty of opportunities to buy when yields improved again, he said.