Monthly Archives: April 2021

Apr 17

How Many Australians Own and Profit from an Investment Property?

By Shane | Uncategorized

The property market is an obsession in Australia, with homeownership almost seen as a birthright and an investment activity growing by the year. While owner-occupiers represent the biggest contingent of homeowners, market speculation and rental income continue to drive the local economy. Property investment in Australia is having a pronounced impact on house prices, sales volumes, housing affordability, and the overall health of the domestic economy.

If you’ve ever wondered just how many people own an investment property in Australia, you are certainly not alone. Let’s take a look at property data from the Australia Taxation Office (ATO), based on results from the 2018-2019 tax year. All of the data in this article is based on people with a financial interest in a rental property. While some investment properties do not draw a rental income, this situation is rare.

These ATO figures are the latest statistics available. This article is an updated and expanded version of this Pearl Financial blog post

How many Australians own an investment property?

According to the ATO, there were 2,227,174 property investors in Australia during the 2018-2019 tax year. This figure grew slightly from 2,207,905 people recorded during the 2017-2018 tax year. This data is based on solely and jointly owned properties, including those bought or sold during the 2018-2019 financial year.

Out of the Australian population of 25,364,300 as of 30 June 2019 according to the Australian Bureau of Statistics (ABS), 8.8% are property investors. However, while less than 1 in 10 Aussies own an investment property, the situation is a little more complex. In order to get an accurate picture, you also need to analyse investment property ownership rates based on working-age, tax-paying, and household figures.

How many working-age Australians own an investment property?

Individual results don’t paint an accurate picture, with Australia’s working population just 65.4% of the overall population at around 16.5 million. With just under 2/3 of all Aussies old or young enough to earn an income, the real percentage of investment property owners rises to roughly 13.2% of the overall population. The working-age population includes all people aged between 15 and 64 years.

Interestingly, this number has been on a steady decline in Australia for many years, with a high recorded in 2009 at 67.5% of the total population. However, despite the slow and steady drop of working-age Aussies, property investment activity has seen a healthy rise. Growth in this area has been significant, with 2,051,525 investment property owners recorded in the 2014-2015 financial year leading to a rise of 7.9% over the last four years.

How many tax-paying Australians own an investment property?

The percentage of investment property owners rises even more when you consider people in a realistic position to own an investment property. During the 2018-2019 financial year, just over 14 million Australians lodged a tax return. With the income-taxable population just 56% of the total population, the number of investment property owners rises significantly to 15.9%.

How many Australian households own an investment property?

All of the data listed so far is based on individual Australian residents. As you might expect, the percentage of investment property owners rises even more when you consider households. According to the 2016 Census of Population and Housing, which is the latest one we have to work with, there were 8.3 million households across the country. When this figure is used to calculate percentage data, the number of investment property owners jumps to almost 27% of the total population.

This number is not quite accurate, however, because it uses 2016 household figures alongside population data from 2019. The number of households in 2019 was closer to 10 million based on ABS projections, which puts the percentage of household property investors down to around 22%. This number starts to seem very real, with over 1/5 and almost 1/4 of all Aussie households owning and drawing rental income from an investment property.

How many Australians own more than one investment property?

While you hear stories of successful property tycoons all the time, the number of multiple-property investors on the ground may surprise you. If less than 10% of Australians own a single investment property, how many do you think have a portfolio?

According to the ATO, the majority of investors own a single property at 1,589,563, which grew from 1,571,217 the year before. The number of people with two investment properties was recorded at 420,529, followed by 129,816 with three properties, 47,319 with four properties, 19,513 with five properties, and 20,434 with six properties or more.

In terms of percentages, the number of people with investment properties may surprise you even more. Around 6.3% of the total population own a single investment property, which is around 9.5% of the working population, 12% of the tax-paying population, and 16% of the household population. Just 1.65% of the total population own two properties, which is around 2.5% of the working population, 3% of the tax-paying population, and 4.2% of the household population.

These numbers drop to very low levels when more than two properties are considered. For three properties, the figures are around 0.5%, 0.75%, 1%, and 1.4% of the total, working-age, tax-paying, and household populations, respectively. For four properties, the numbers are 0.18%, 0.27%, 0.35%, and 0.5%. For five, six, or more properties, the numbers are 0.08%, 0.12%, 0.15%, and 0.22%.

All in all, the number of people with a large property portfolio is statistically insignificant compared to the overall population. Saying that, however, property investment activity influences the price of housing across Australia and has a very real impact on housing affordability and the wider rental market.

Rental income derived by Australian property investors

According to figures from the ATO, the rental income earned by Australian investors has been rising steadily over the last five years. In the 2014-2015 financial year, investors took home around $40 billion in gross rental income, with almost $20 billion recorded in rental interest deductions and another $20 billion recorded in other rental deductions. There was also a small amount, of around $2.5 billion, recorded in capital works deductions. In total, deductions reached around $43 billion.

The amount of rental income rose to around $44 billion in 2016-2017, with almost $49 billion recorded 24 months later in 2018-2019. Deductions also rose over this period, with cumulative deductions reaching just beyond $50 billion. With such a huge amount of money crossing hands between investors, renters, construction professionals, and the taxation department, it’s more important than ever to make smart investment decisions.

Individual rental profits vs rental losses

When this data is analysed for individuals, it’s easy to see just how difficult property investing can be. The following figures from the ATO use data from 2019, based on individuals with a single investment property. Overall, 658,431 people recorded a profitable or neutral rent position, and 931,132 recorded an overall net rent loss. This ratio highlights the complex and often challenging investment landscape that exists across Australia.

When people own more than one investment property, the ratio of losses to gains is improved. For two property interests, the numbers are 170,494 neutral/profit and 250,035 loss. For three properties, the figures are 54,861 and 74,955. For four property interests, the numbers are 20,600 and 26,719. For five, they are 8,578 and 10,935; and for six or more, they are 9,208 and 11,226. While negative gearing is available and investment properties are a great way to accumulate capital gains over time, reliable rental income is not always guaranteed. 

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