The highs and lows of Australia’s property market were a hot topic even before the pandemic-induced price boom of 2020-2021.
And with so much talk about extravagant surges in both the number and value of property sales, talk also turned to how much money some of these ‘lucky’ property investors managed to make.
After all, with property prices at never-before-seen highs, many investors took the opportunity to sell up while the market was still boiling.
So you’d be excused for presuming that all property investors are mega-rich tycoons with huge portfolios of properties.
But you’d be wrong.
Here’s why.
There aren’t as many property investors as you think
Despite Australia's insatiable obsession with real estate, most households don’t own an investment property.
Did you know that 4-in-5 households don't invest in property at all, according to the Australian Bureau of Statistics (ABS) survey of income and housing?
It shows that the overwhelming majority of people are owner-occupiers who own only their current home or are either renters who don’t own any property.
Let's look at it in another way.
If there were 100 Australians then 16 would own an investment property and 84 would not own an investment property.
Then breaking those numbers down further, of every 100 property investors:
- 76 had a rental loss (they negatively geared - 1.28 million Australians)
- 24 had a net rental profit
- 75 owned just one investment property
- 19 owned two properties
- 6 owned three properties
- 2 owned four properties (118,412 Australians)
- 1 owned five properties (37,213 Australian)
- 1 owned six or more properties (19,198 Australians)
How many investment properties does the average Australian own?
According to the latest Australian Taxation Office (ATO) statistics, actually not that many.
While almost 75% of the 2 million Australians with rental properties had just one investment, 118,412 investors had three.
But the number of investors with interests in five or more rental properties jumped 6.3%to 37,213 in 2014-15.
Yet despite all the success stories you read in the property magazine, there are only 19,198 Australians with an interest in six or more investment properties.
So if these property investors aren’t the mega-rich… who are they?
The typical property investor is… a mortgage holder
According to ABS data for 2019–20, homeowners with a mortgage are most likely to own other rental properties versus renters or even owners without a mortgage.
Over 20% of owner-occupier households with a mortgage also own another rent-earning investment property.
A further 6% own a second property which they don’t earn rent from.
However, owner-occupier households without a mortgage are just as likely to own a non-rent-earning second property, and much less likely to own another investment property that is rented out.
Meanwhile, the data shows that only 7.5% of renter households own a residential property that earns a rental income - being ‘rentvestors’ who buy an investment property and then continue to rent themselves.
The typical property investor is… ‘working age’
ABS data also shows that nearly 70% of those who own investment property are aged 36-64 years old.
Young households aged 15-24 and below are very unlikely to own investment properties (just 0.5% do), but that’s unsurprising.
The typical property investor is… a higher income earner
The data also shows that it’s Australia’s highest income earners are most likely to be property investors.
But property investment isn’t isolated only to those at the top.
ABS data shows that 35.7% of the highest quintile of household income (top 20% of the income earners) own an investment property, with 23.1% of those in the fourth quintile before the numbers drop dramatically for lower-income earners.
That’s not surprising given how hard it is for lower-income earners to buy one property, let alone another.
Even so, while lower-income earners are less likely to be investors, there are still a lot of lower-income investors.
And the ATO has data that breaks those numbers down even further into smaller income brackets.
More than a third of tax filers that earn more than $250,000 are property investors.
That’s more than double the average across all income brackets, though, of course, there are very few people that earn these high incomes.
Just 1.5% of tax filers report a taxable income of more than $250,000.
What is interesting is that property investors do still exist in the lower property brackets.
Around 20% of those in the $80,000-$90,000 income bracket are property investors.
Even in the $10,000-$50,000 income range investors account for around 10% of people.
In fact, a little less than 40% of all property investors earn less than $50,000.
How is this possible?
Many of these lower-income investors are likely retired, which would explain their lower taxable income.
Nearly half of investors with taxable incomes under $50,000 are 55 or older.
A final note
No matter what type of property investor you are, or strive to be, it’s important to remember that property investment is available to everyone from all walks of life.
The data already shows us that you don’t have to be among Australia’s richest to be within a chance of creating your own property portfolio - although it would make it easier and more likely.
Most importantly, you need to start by having a plan and a time-tested proven strategy.
In fact, a recent audit of Metropole clients showed they were 7.3 times more likely to own six or more investment properties than the average property investor and that’s because we always start by helping them build a personalised Strategic Property Plan that contains the following components:
- An asset accumulation strategy
- A manufacturing capital growth strategy
- A rental growth strategy
- An asset protection and tax minimisation strategy
- A finance strategy including long-term debt reduction and…
- A living off your property portfolio strategy
It’s vital to remember that in order to become a successful investor you will need to surround yourself with a team of independent and unbiased professional advisors (not salespeople).
A team of people who are known, proven, and trusted, so it is probably appropriate to remind you that in changing times like we are experiencing, no one can help you quite like the independent property investment strategists at Metropole.
