How much attention should property investors pay to consumer sentiment?

Consumer sentiment is dipping slightly across the nation, but experts say that’s no reason for property investors to pull back on their plans, hopes and dreams.

Instead, they should switch off from the news cycle, avoid being affected by any prevailing pessimism and work out exactly what they want to achieve and how they’re going to get there.

“Consumer sentiment does play a major part in investment decisions, as that does drive people’s decisions,” says property investment specialist Ravi Sharma, the author of the new book Retire Filthy Rich with Real Estate.

“It’s hard to ignore high interest rates, falling property prices, and a rising cost of living, which all fuel negative sentiment.

“But it’s important to stay in the right positive mindset in order to grow wealth. You have to rely on data rather than emotions.”

Sharma, the founder of Search Property Buyer’s Agency, says it’s vital to make smart, strategic investments regardless of sentiment.

That means leveraging proven tactics like rentvesting as well as unlocking equity in existing assets.

“If you look at historical trends, market cycles have always been short-lived,” he says. “If you talk to someone, for instance, who invested in 2009/2010 in the midst of the GFC, they’ll say now how they wish they’d bought more.”

The Westpac-Melbourne Institute Consumer Sentiment Index declined 0.7 per cent to 921 in January from 92.8 in December. Yet sentiment is still less negative than a year ago, and many believe consumers expect life to improve from here.

Westpac chief economist Luci Ellis also blames global uncertainty.

“As well as the ongoing unsettled global backdrop, it is possible that consumers were reacting to news about the depreciation of the Australian dollar against the US dollar, which resulted in some negative headlines about the outlook for interest rates and the broader economy,” she says.

While Victoria is still experiencing many sell-offs, blamed on increased general holding and compliance costs, higher land tax and rising government charges, Western Australia is receiving a flood of newcomers, attracted by a government many see as pro-investment.

“There’s certainly some correlation between consumer sentiment and investment activity,” says AMP Capital chief economist Dr Shane Oliver.

“But we’re seeing share-market investors anticipating improvements in the economy more keenly than real estate investors, who are arguably less forward-looking.

“As a result, property investment has been subdued, but sentiment is likely to pick up later with so much talk of interest rates coming down.”

That’s certainly helping boost the luxury Sydney market, says Tina O’Connor, the licensee in charge at Ray White Annandale.

“We’re finding people are very optimistic going forward,” she says. “In the first three Saturdays in January, we’ve had double-digit numbers of groups coming through our apartments for sale. For one property, we had 25.

“I think that’s all a reflection of the belief that interest rates will be down soon, and negative gearing is still a good, positive policy.”