“Fat cat”, Mercedes driving, Prosecco swilling baby boomers, who’d do anything to squeeze an extra dollar or two out of their tenants’ pockets.
Many myths and urban legends abound when it comes to what the “average” property investor looks like.
During the last big housing boom, investors were vilified as the monsters making housing virtually unattainable for their children. Selfishly buying up swathes of inner city real estate with their leveraged credit, and over-inflating values in their wake.
So is this a fair assumption, or more like a biased judgment call?
Do investors deserve the demonisation often directed their way? Are they the rich, greedy and entitled, fortunate few?
Or…are they simply average Aussies, like you and me, making an attempt to secure their future and their children’s future in what has become, let’s face it, a fairly uncertain world?
How many players are in the property game?
According to the most recent available statistics from the Australian Taxation Office (ATO), there are currently a little over 2.15 million property investors in this country.
Of that number, around 1.95 million or 90.2% only own one or two properties. A further 212,000 landlords have portfolios of three to six properties, while just 20,000 – less than 10% – own 6 or more income producing housing assets.
How much wealth do they control?
One of the most hotly contested political debates surrounding the federal election earlier this year – and some would suggest one that cost the Labor Party what many saw as an easy win – was around the so-called “tax perks” enjoyed by property investors.
Negative gearing and depreciation “incentives” were in the direct firing line for potential policy changes, with further suggestions that rather than the potential to make additional claims at tax time, landlords should be forced to cough up more for the public coffers than the “Average Jo”.
But here’s the kicker…when you drill down into the statistics and the dollars and cents figures, it turns out most landlords ARE the “Average Jo”.
At time of writing, the annual, average gross wage in this country is around $82,000. Of the 1.5 million (71%) property investors who own just one property asset however, 43% earn $50,000 or less, before tax. Hardly those Prosecco swilling fats cats!
The vast majority who own just one asset – 77% according to the ATO – earn less than $100,000 a year before tax.
Surely those with double the amount of properties – a whole two! – in their portfolio would be raking in the big bucks in some high paid, professional corporate gig? Maybe on a CEO’s salary?
Again, perceptions can be deceiving, with 39% of investors who own 2 properties earning less than $50k per annum, and 73% on less than $100k a year.
Of course some of these investors would be part of households with the potential for combined incomes to equal considerably more than $50,000 to $100,000, therefore providing greater asset buying clout. But even so, it’s hard to look at these figures and suggest investing in real estate is a game exclusively reserved for the privileged few.
Bagging out the Boomers
Perhaps the most common misconception surrounding property investors in Australia; that more baby boomers than any other demographic own housing assets, isn’t even supported by actual tax office data.
In fact statistically speaking, the age of active investors who own one or more properties is split almost straight down the middle, with 49% being over 50 years, and the remaining 51% not having quite hit the half century milestone.
More and more young people are realising they need to be pro-active when it comes to building and managing an effective retirement nest egg. Not just late blooming boomers scrambling for a bit of extra cream on top of their superannuation pie.
Villains or heroes?
So what about all that rent money these greedy investors are raking in?
Ha! Far from living off the fat of their tenants each month, 59% of landlords are operating their portfolios at an average annual net loss of around $6,500, while the remaining 41% are recording an average annual profit of a little under $7,000.
And let’s face facts, these investors are providing a critical, private accommodation supply to those who cannot afford to purchase their own home and remain indefinitely in the rental market.
Of the more than 3.1 million residential rental properties across Australia, only 1.2% are publicly supplied; meaning almost 99% of all dwellings keeping people sheltered, who might otherwise be homeless, are due to those mum and dad investors so many people love to hate.
The truth is, property investors are a very necessary part of a delicate social and economic ecosystem in this country. And this should be a very real consideration when it comes to future government policy planning around property investment.
Particularly with regard to removing tax incentives which, in many cases, give these “Average Jo” mum and dad investors, the chance to provide much needed rental stock for the housing market.
Rental stock they might not, otherwise, be able to afford. And that our young people cannot afford to lose.