Key takeaways
Investing in property to make money is the main reason most Australians buy property, and the better you can nail down the process, the more successful you will become.
Property investors often learn about investing by trying different strategies and listening to every point of view, but they are often not much better off financially than when they started investing.
The latest data from the Australian Taxation Office shows that 2.24 million Australians are property investors, and collectively they own 3.25 million investment properties. Of these, 71.48% hold 1 investment property, 18.86% hold 2 investment properties, 5.81% own 3 investment properties, 2.11% own 4 investment properties, and 0.87% own 5 investment properties.
The number of Australian property investors has fallen over the last 7 years as a result of APRA's macroprudential controls, interest only lending restrictions, the federal labour party threatening to remove negative gearing, and removal of depreciation claims on existing properties.
Measure your progress towards your goals, identify risks you hadn't thought of, and grow your wealth through property faster than the average investor.
While achieving financial freedom through property investing is very achievable for most Australians, it’s also quite an overwhelming task.
You see, unlike buying a property to live in, the main reason for buying an investment property is to make money — to help you build a long-term “cash machine.”
And the better you can nail down the process, the more successful you can become and the easier it will be to reach your ultimate goal of financial freedom.
You see... the concept of property investment is a process.
Property investing is a journey that needs to be done in the right sequence rather than seen as a one-off event.
It’s all very well knowing about the typical stages of an investment journey, but did you know that most investors never get past phase 1 or 2?
In fact, 92% or more of investors never get past buying their first or second property — meaning they don’t even surpass phase 1.
The reality is that most investors need at least 30 years to build a substantial property portfolio that is big enough to replace their personal exertion income.
However, you can speed this up by shortening phase 1 by receiving strategic advice and not making mistakes.
The three phases of your property investing journey
No matter how long it takes to grow your wealth, there are typically 3 natural maturing phases as you advance through your property journey.
Phase 1: Learning what NOT to do
This is the first phase, where property investors learn about investing by trying different strategies and listening to every point of view in the market.
But the most likely outcome from doing this, even years down the track, is that they are often not much better off financially than when they started investing.
This phase often takes 5-10 years for many property investors, although some investors will remain stuck at this stage permanently.
Phase 2: Sticking to a winning formula
Some property investors who have managed to critically examine what works for them and identify a winning formula in phase 1 are able to move on to phase 2.
By this phase, these property investors have gathered enough wisdom to stick to what works for them and are able to stop listening to everyone else’s point of view.
There will always be Property Pessimists around — you know… 'Negative Nellie’s' telling you not to invest.
And there will always be white noise to confuse you with the latest property investment fad.
However, in phase 2 of their personal investment growth, investors stick with “what has always worked” rather than looking for something that “works now”, such as finding the next hotspot or getting rich quickly.
Phase 3: Moving towards a financial objective with a deadline
This is the phase where the investors' asset base grows sufficiently to allow them to leverage off their increasing equity and cash flow to buy more properties.
The different types of investors in each property investment phase
Unfortunately, 90% of property investors sit in phase 1, where they will remain for a long time until they’re able to become aware enough to critically examine what they’ve done.
These investors will probably never move from this phase until they have sought the right advice to help objectively review and learn from past experiences.
Why doesn’t this happen?
Most property investors struggle to move out of phase 1, often because they are often not even aware that they are in it!
Awareness is 50% of the answer.
Phase 2 investors make up slightly less than the remaining 10% of property investors in the market.
They’re winners in that they’ve developed their knowledge and understand what works for them, but phase 2 investors would do so much better if they were able to move up to the third and final phase and allocate their resources and capacity intelligently.
Phase 2 investors’ investing activities can still be subject to the market, but at least they have found a winning formula for themselves in property, (even if that winning formula is still subject to market movements).
Lastly, the investors in phase 3 make up less than 1% of all property investors in the market.
- Also read:Latest property price forecasts for 2025 revealed. What’s ahead in our housing markets in the next year or two?
- Also read:Sydney property market forecast for 2025
- Also read:Brisbane’s property market forecast for 2025
- Also read:This week’s Australian Property Market Update – Latest Data, State by State December 10th 2024
- Also read:Everything you need to know about the state of Australia’s property markets in 20 charts – December 2024
Phase 3 property investors are the only group that has not only conquered the property market (i.e. have a winning formula in property) but have also conquered themselves as well to become strategic investors.
Strategic investors buy properties so they can buy more properties (not for cash flow).
They have built an excellent team around them and are in more control over their financial destiny than either of the previous 2 groups of investors.
Phase 1 investors often find themselves feeling “stuck” even after many years of investing, while phase 2 investors can also feel stuck when market conditions change against their expectations.
It is only the phase 3 investors who can go through both good times and bad with confidence and certainty.
How many properties do investors typically own?
The latest data from the Australian Taxation Office (ATO) reveals that 2,245,539 Australians or around 20% of Australia’s 11.4 million taxpayers owned an investment property in 2020-21 – this is the latest data available at the time of writing and was released in June 2023.
Note: That means that around 2.24 million taxpayers in Australia are property investors, and collectively they own 3.25 million investment properties.
Here’s how many properties investors hold in Australia in the 2020-21 financial year:
- 71.48% of investors hold 1 investment property
- 18.86% of investors hold 2 investment properties
- 5.81% of investors own 3 investment properties
- 2.11% of investors own 4 investment properties
- 0.87% of investors own 5 investment properties
- 0.89% (or 19,920) of investors hold 6 or more investment properties
Fewer Aussies are getting into property investment
While the number of property investors actually rose a little (there were 18,698 more investors than the previous financial year) it's likely this number will be much lower over the next few years as investors flee the market.
Looking at a back series of these ATO stats shows that a decade ago 60,000 to 70,000 new investors entered the property market each year, but this number has fallen significantly over the last few years.
So there are fewer new investors entering the market.
Number of Australian Property Investors:
| Year | Total | Change on previous years |
|---|---|---|
| 2009-10 | 1,704,220 | 68,316 |
| 2010-11 | 1,765,880 | 61,660 |
| 2011-12 | 1,854,519 | 88,639 |
| 2012-13 | 1,942,339 | 87,820 |
| 2013-14 | 2,010,923 | 68,584 |
| 2014-15 | 2,051,517 | 40,594 |
| 2015-16 | 2,097,382 | 45,865 |
| 2016-17 | 2,156,319 | 58,935 |
| 2017-18 | 2,207,893 | 51,574 |
| 2018-19 | 2,227,174 | 19,281 |
| 2019-20 | 2,226,841 | -333 |
| 2020-21 | 2,245,539 | 18,698 |
Of course, the figures above are nett numbers, meaning the change in the number of investors after some investors have exited the market by selling a property and others have entered the list when they bought a property.
Having said that, you can see how invested numbers have fallen over the last 7 years as investors have had to contend with:
- 2014 - APRA's macroprudential controls throttling banks' ability to lend to investors
- 2016 - APRA limiting interest only lending
- 2017 - The federal labour party threatening to remove negative gearing which lost them an election when they tried again in 2019
- 2017 - Removing depreciation claims on existing properties and travel bans to inspect your investments.
- 2019 - APRA increasing buffers and the "floor rate" to 7%
- 2020 - Victorian government's massive tenancy law reforms favouring tenants
- 2021 - APRA lifts lending buffer to 3%
- 2021 - Queensland government's Tenancy Reform announced
- 2021 - The RBA starts raising interest rates
- 2023- ACT and WA propose Tenancy Reforms
Note: The data also shows that, while older Australians used to own the majority of investment properties, that has now shifted - today, ‘working age’ Australians dominate when it comes to property investment.
The top investor age groups are:
- 5% are aged between 55 and 64 years old
- 5% are aged between 45 to 54 years old
- 5% are aged between 35 to 44 years old
- 5% are aged between 25 to 34 years old
- 12% are aged between 65 to 74 years old
- 5% are aged 75 years old or more
- 5% are aged between 15 to 24 years old
A strategic property plan will help achieve real financial freedom
Contrary to what many people seem to think, attaining wealth and real financial freedom doesn’t just happen.
It’s the result of a very well-executed plan.
And before we go any further, I’ll point out that simply buying a property is not a plan.
What you need is a strategic property plan as this will help you achieve the financial freedom you desire because it will help you with the following:
- Define your financial goals.
- See whether your goals are realistic, especially for your timeline.
- Measure your progress towards your goals — whether your property portfolio is working for you, or if you’re working for it.
- Find ways to maximise your wealth creation through property.
- Identify risks you hadn’t thought of.
- And the real benefit is you’ll be able to grow your wealth through your property portfolio faster and more safely than the average investor.
As always, before embarking on creating a strategic property plan yourself, you should speak to an expert.
And that’s where we at Metropole can help.
Whether you’re a beginner looking for a time-tested property investment strategy or an established investor who’s stuck or looking for a second opinion, our Strategic Property Planning service can help you plan out some scenarios to help make better-informed decisions to boost your financial future.
Where are you on your investment journey?
Sure, the markets are moving on, but not all properties are going to increase in value.
Now, more than ever, correct property selection will be critical.
You can trust the team at Metropole to provide you with direction, guidance, and results.
