With Australia’s army of negatively geared property investors facing outright falls in property prices and rents, angry investors claim they are the “forgotten victims” of the COVID-19 pandemic:
Landlord Enrica Centorame, director of a freight logistics company, has had requests from tenants in her two investment properties for a six-month moratorium on rental payments, jeopardising her personal finances…
“State and federal rules for tenants have put landlords with one or two properties in a terrible position,” she says. “We are being punished for investing for our retirement and trying to avoid being a burden on the government.”
Centorame’s fears and frustrations are echoed across Australia by landlords who have purchased investment properties and need rent to pay the mortgage…
“They are confused and bewildered,” says John Gilmovich, president of the Property Owners Association of NSW. “Many are on the edge – very concerned and stressed. None of the reforms focus on the welfare of the landlord.”
This is what happens when you invest in a “market”. Prices/rents rise and fall alongside prevailing economic conditions.
With mass job losses looming, alongside falling household incomes, many tenants will obviously be unable to pay their current rate of rent, meaning landlords will have to take a haircut.
The situation will get much worse for landlords given the expected collapse in immigration, alongside the flood of rental stock as Airbnb’s get placed on the long-term rental market.
Ultimately, the COVID-19 pandemic is a timely reminder of the dangers of tax-driven negatively geared investing.
Paying your property a dividend in the hope that it rewards you with capital growth is a risky strategy that only works during favourable economic and monetary conditions.
Those conditions have now turned sour. Property investors must deal with it.
