While the total number of rental properties increased to 2 ¼ million in the 2019 tax year, the number of landlords claiming a net rental loss declined to 1.3 million, taking the share of negatively geared landlords below 60 per cent for the first time.
Pete Wargent, co-founder of BuyersBuyers.com.au said that investors were seeing better cashflow from their investments.
Figure 1 – Total rental properties
Mr Wargent said “in line with what we experience the tax office figures show that over 90 per cent of landlords only own one or two properties. To grow a larger portfolio, better planning and decisions are required, and most don’t make it”.
Figure 2 – Landlords with an Interest in a Rental Property
The tax office figures showed that the net rental losses from investment properties declined to $3 billion due to tighter rules on deductions and lower interest rates.
Figure 3 – Rental Income and Deductions
Mr Wargent of BuyersBuyers.com.au said that average rental losses were now only modest.
“After tax, many more landlords are in a cashflow positive position. The tax office figures are historic, and mortgage rates have declined sharply since the 2019 tax year” Mr Wargent said.
Figure 4 – Average Net Rental Losses by Tax Year
Doron Peleg, founder of Riskwise Property Research, noted that out of pocket expenses for investors had declined in recent years, while in many parts of Australia it has become cheaper to be an owner rather than a renter from a cashflow perspective.
Mr Peleg said that “this dynamic tends to be very supportive for housing market activity and prices at a time when the economy is rebounding solidly in Australia”.
Mr Wargent of BuyersBuyers.com.au added that “there has also been a huge shift in the composition of lending, with most landlords now using the rental income to pay down their loans. Overall, landlords are in far better shape than we have seen previously, especially from 2008 to 2012 when net rental losses were considerably higher”.
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