The 2008-09 Australian Taxation Office (ATO) Taxation Statistics were released yesterday (available here), and the data on property investment was very interesting.
First, the number of property investors reporting to the ATO fell by 34,000 or 2% from the previous year (see below chart).
Second, after rising steadily since 1999-00, the overall value of net rental losses fell by $2.1 billion or 24% from the previous year (see below chart).
Finally, property investment appears to be the investment of choice for middle-income Australians, with 78% of all investment properties held by individuals earning less than $80,000 per annum. In addition, 66% of investment properties were negatively geared in 2008-09, down slightly from 70% in the previous year (see below chart).
One thing to note is that the data for 2008-09 is likely to have been distorted by the surge of first home buying over the 2008-09 period, following the Government’s temporary increase to the first home owners’ grant (FHOG) in response to the Global Financial Crisis.
The spike in first home buyer activity over 2008-09 is clearly evident by the below charts from RP Data. First, consider the number of first home buyer finance commitments:
Now, consider the percentage of first home buyer commitments.
Many of the increased number of first home buyers in 2008-09 would likely have: (1) purchased pre-existing dwellings from investors; or (2) displaced would-be investors from buying an investment property. As such, the investors’ share of the property market over 2008-09 would likely have fallen just as the first home buyers’ share rose.
Also, the amount of rental losses would have been reduced by the sharp fall in mortgage interest rates, which fell from 9.45% in June 2008 to 5.8% in June 2009.
It will be interesting to see whether next year’s ATO Taxation Statistics show an increase in property investment and higher rental losses for the 2009-10 period, particularly in light of the large drop-off in first home buyers and the rise in mortgage interest rates.