Over the weekend, the Telegraph published an article questioning why more Australians aren’t engaging in property investment when the potential returns are so good?
SERIOUS money is waiting to be made in property investment but most Australians don’t want to know about it…
A Ray White Projects survey found 11 per cent of 1500 adults owned an investment property, while only 3 per cent owned two or more.
“It’s hard to believe 86 per cent of Australian adults do not have an investment property,” said Dan White, Ray White Projects director.
“It contradicts the commonly held perception that bricks and mortar are one of the safest forms of future planning.”
The survey showed 59 per cent of people wanted to see an increase in property prices or greater market stability before investing.
“No one knows exactly how or when a property market will change direction,” Mr White said. “When it does, people are surer about the investment. They might not make as much as if they bought at the bottom, but they won’t lose money.”
One wonders why the Telegraph has cited a narrow survey of just 1500 adults by Ray White when reputable data from the Australian Taxation Office (ATO), covering the entire economy, is publicly available?
According to the ATO, there were 1.75 million property investors in Australia in 2009-10, representing around 14% of taxpayers. Of these, 1.1 million property investors, or 9% of taxpayers, claimed a loss (i.e. were negatively geared), with the average loss for a negatively geared investor standing at -$9,100 in 2009-10.
Therefore, to suggest that property investment is a sure fire path to wealth flies in the face of the ATO’s statistics, and would require a sustained combination of solid capital growth, rising rents, and falling mortgage rates in order to ensure that the majority of property investors made a decent return. While these ingredients have arguably been in place over the past year, that is no guarantee of the future, especially a post-mining boom future.
Indeed, an article in the Courier Mail over the weekend outlined how thousands of Australians are being stung in property investment schemes as spruikers use the lure of negative gearing, strong capital and rental growth, as well as fears of an impoverished retirement to entice investors:
THOUSANDS of Australians are being stung in property investment schemes of dubious value, with real estate agents saying the practice has infested the entire industry.
Using cold calls, home visits and high-pressure seminars, marketing agents ramp up fear of an impoverished retirement to push gullible mum and dad investors into buying investment real estate.
They promise a low weekly cost to negatively gear properties, high rents and the certainty of strong capital growth in suburbs well outside of the Brisbane CBD.
But many of the units and townhouses’ capital growth has been largely absent, with most buyers only learning the sad truth if they go to list the property for re-sale.
Investors have also found their weekly costs are higher than expected, putting pressure on household budgets. Rents are often far less than predicted and supposed waiting lists of tenants never materialise…
While all real estate is local, and profitable investment opportunities can always be found in any market, the days of simply buying a run-of-the-mill investment property, sitting back, and watching one’s wealth increase on the back of inexorable capital growth ended in 2010. From now on, making money from real estate is likely to be much more difficult, and the probability of loss that much greater.
