At a time when the cost of living is high, and many Australians are feeling the pinch on their finances, there is a lot of discussion around about how much money you need to be considered ‘rich.’ The topic of wealth and its definition is always up for debate, and the same can be said for the perception of property investors in Australia. Some people think of them as greedy individuals, buying up all the affordable properties and leaving little for the rest. But is that the truth?
The Australian Taxation Office (ATO)’s recently released statistics reveal some numbers that can help to give an insight into how rich property investors are. According to CoreLogic, the number of residential dwellings in Australia has boomed to 10.8 million, with the total value of Australia’s residential market surging from just over $7 trillion before the pandemic to $9.3 trillion. There is a total of $2.3 trillion in outstanding mortgage debt for these properties, and 57.3% of Australian household wealth is held in housing.
The latest data from the ATO reveals that over 20% of Australia’s 11.4 million taxpayers owned an investment property in 2019-20. That figure is 14.9% if 3.6 million non-taxable individuals are included. That means around 2.22 million taxpayers in Australia are property investors, and collectively they own 3.25 million investment properties.
While the number of property investors fell for 2019-20 for the first time since the 2007-08 financial crisis, it was by only 333 individuals. Interestingly, today, ‘working age’ Australians dominate when it comes to property investment. The data shows that, while older Australians used to own the majority of investment properties, that has now shifted.
Let’s dive deeper into the statistics to see how much rental income these property investors are earning. Of the 2.22 million property investors, 54% are reported to have been negatively geared during the 2019-20 financial period, claiming a net rental loss for the year. That means that Australia’s property investors collectively incurred a $166.5 million net rental loss over the period, the smallest in two decades. The data also shows that investors with fewer properties are more likely to be negatively geared.
The truth is, nothing much has changed over the years. The fact that 90% of investors only own one or two investment properties has been the status quo for many years. Property investment may be simple, but it’s not easy. Most property investors failed to build a sufficiently large property portfolio to provide them with a substantial retirement income. However, growing a property portfolio will supplement your superannuation and other investment assets to help secure your financial future.
Of course, the number of investment properties you own is not nearly as important as the quality of your assets and the amount of equity you have in them. As the famous saying goes, “It’s not about timing the market, it’s about time in the market.” Over the long term, property prices in Australia have continued to rise, and investing in property has proven to be an effective way to build wealth. Property investment returns in Australia have been consistently high compared to other investments over the long term.
If you’re considering investing in property, it’s important to do your research and seek professional advice. While property investment can be an excellent way to build wealth, it’s not without risks. It’s essential to have a well-thought-out investment strategy in place, understand your financial goals, and have a clear understanding of the risks involved.
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