Home Insights The average Australian landlord isn’t who you might imagine

The average Australian landlord isn’t who you might imagine

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Australia is vast Most of the housing stock is household ownership – In fact, more than 95% of them.

This is unlike some other countries where it is more common for governments or companies to own rental properties, such as build-to-rent developments.

What do Australian property investors look like in general? Imagining a super rich mogul with dozens of properties might surprise you.

Investment property ownership is less common

First of all, despite Australia’s insatiable obsession with real estate, most households do not own investment property.

According to the Australian Bureau of Statistics Income and Housing Survey, 4 out of 5 households do not invest in property at all.

The vast majority of people are renters who do not own real estate, or owners who own a home but do not have other residences.

Put another way, of Australia’s approximately 10 million households, approximately 2 million households invest in real estate.

Most landlords in Australia are what experts call “mom and dad investors” who own one property.Photo: Getty

Of the one-fifth of households investing, almost all own and rent property.

Only 6% of households own residential property that they neither live in nor rent. This includes vacation homes, but may also include households that temporarily live elsewhere but choose not to sell or rent their primary home.

Most households do not invest in real estate, but the proportion that does has increased significantly over the last 40 years.

Tax return data provides insight into the percentage of people who report rental income. For technical reasons explained in the footnote, this data is not directly comparable to his ABS household data, thus underestimating investor prevalence. [1]

In the 1978/79 financial year, only 4.2% of tax filers reported rental income on their tax returns.

By 2018/19, the most recent year for which data are available, its share more than tripled to 15.1%. This share has remained largely stable since 2012/13, with the current share declining slightly from his 2013/14 peak.

Households with mortgages are most likely to own investment properties

Homeowners with a mortgage are more likely than other types of households to own rental homes, whether they are renters or people who own the home outright.

More than one-fifth of mortgage holder households also own an investment property with rental income. A further 6% own her second home, which is not rented.

This means that 3 out of 10 foreclosure households own a second home.

In contrast, households that outright own a home are much less likely to own an investment property that does not earn rent, but are much less likely to own a second property that does not earn rent. There is none.

Unsurprisingly, this latter group tends to be older given the time it takes to pay off their mortgage, and as we will see below, older households are less likely to own a second home. less sexual.

“Rentvesting” describes households that own property but rent the house they live in. Not so common. Only about 7.5% of renter households own homes that generate rental income.

Only 5.6% of rental households own a home, but do not receive any rental income from it. We can’t know their situation, but it’s possible that they temporarily live in another state or city and are renting there, but have a house in another location and intend to return.

Investors tend to be of working age but are older and older

7 out of 10 households with investment properties are between the ages of 35 and 64.

This is much more than the entire population. About 51% of people who do not own an investment property belong to these age groups, as do 56% of them across households.

Younger households – 24 and under – very They are less likely to own an investment property (only 0.5% own it). That’s not surprising. Households at this age are less likely to own a property, let alone an investment property.

Investment property owners have aged over the last 20 years.

Australian Revenue Service data show that since 2000, the proportion of tax filers aged 30 to 49 who are interested in rental property has declined, while the proportion of those aged 60 and over has increased.

Older households, especially those aged 75 and over, are an underrepresented share of investment property ownership.

This is likely due to a number of factors.

Among these are the fact that many households will sell or write down their assets in retirement, the difficulty of obtaining a mortgage in retirement, the impact of investment property ownership on pension eligibility, and the impact of investment property ownership on pension eligibility. These include the impact on eligibility and the tax implications of investment properties. The loss of rent cannot be offset against the income of non-existent employees, making retirement less attractive.

Most investors own a single property, but some own multiple properties

About 70% of investors own one investment property.[2]

However, about 4% of investors own 4 or more properties, and about 1% own 6 or more properties.

Similarly, most investors’ portfolios are worth less than $1 million, which is about three-quarters of all investor households.

Just to clarify, this is just the value of the property. Not minus what you owe on your mortgage on these properties.

High-income earners are more likely to become real estate investors

More than a third of tax filers earning $250,000 or more are real estate investors.

That’s more than double the average for all income groups, but of course few people earn that much. Only 1.5% of tax filers report taxable income of $250,000 or more.

By comparison, low-income earners are much less likely to earn rental income.

That’s not surprising. Many investors take out mortgages on investment properties, which can be difficult for low-income earners.

Even so, low-income investors are less likely to become investors, but there are still many low-income investors.

In fact, just under 40% of all real estate investors earn less than $50,000. Many of these low-income investors are likely retired, which explains their low taxable income. Nearly half of the investors whose taxable income is less than his $50,000 are over the age of 55.

Negative gearing is common

Negative gearing describes a scenario where someone makes a net loss on a rental property because the costs of owning the rental property, such as interest payments and maintenance costs, exceed rental income.

It’s pretty common.

In 2018/19, just under 60% of tax filers who reported rental income reported an overall rental loss on their tax returns.

This proportion varies slightly across income distributions. People with incomes above $500,000 are slightly less likely to report rent loss than others, but this small Share of population – only 0.4%.

Negative gearing is very common and means most investment properties suffer losses.Photo: Getty

Low-income investors with incomes below $50,000 are also less likely to claim negative gearing. Given that these investors have lower incomes and therefore lower marginal tax rates, there is less tax offset from negative gearing. This makes owning a loss-making property less attractive.

As we’ve seen before, these low-income investors are much more likely to be of retirement age, and we see that here as well. Older investors are much less likely to go negative.

What’s Next for Investors?

In 2020 and early 2021, we have seen many investors sell their rental properties. Along with this, the share of new lending to investors fell to less than a quarter of his. This is the lowest percentage in at least 20 years.

Given that, we can see investor share declining in 2020 and 2021 as new data is released by the ATO and ABS.

But that is starting to change.

The rental market is tight across the country, and rents are rising rapidly. Rental yields have been declining for several years, but are beginning to recover.

In that environment, we are starting to see investors come back. The share of investors in new loans is now over a third, a significant and sharp increase compared to 2020.

This will allow more rental inventory to start pouring into the market, reducing the playing field. But that will take some time.

[1] In particular, the tax return data covers taxpayers rather than households and counts in a different unit than household level data. Not all members receive rental income as there are more taxpayers than households. home Earn and report rental income taxpayer – For example, another member of your household may report its income. Throughout, ATO data-based actions are open to everyone filing tax returns. This includes people who are tax-exempt but still file tax returns (for example, because they fall below the tax-exempt threshold).

[2] For ATO tax data, 71.4% of investors own one property. For ABS household data, 67.6% of investor households own one property.

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