A Profile of the Australian Investor – Who, Where and, What?
FOR IMMEDIATE RELEASE
Monday 20 June, 2016
CoreLogic – Profile of the Australian Residential Property Investor Report – www.corelogic.com.au/investorprofile
A Profile of the Australian Investor – Who, Where and, What?
Housing is the single biggest asset class in Australia, worth an estimated $6.5 trillion across 9.6 million dwellings. The housing asset class is worth more than three times the value of Australian superannuation funds ($2.0 trillion) and more than four times the value of Australian listed stocks ($1.5 trillion).
With the Australian Federal Election imminent, property investment has become a hot discussion topic and continues to attract nationwide debate around taxation policy and housing affordability.
Today, CoreLogic released its national Profile of the Australian Residential Property Investor Report: www.corelogic.com.au/investorprofile, which comprises extensive analysis around residential property investment across Australia, and seeks to quantify investment-related activity.
CoreLogic Asia Pacific research director Tim Lawless said, “Given investors own almost one third of Australia’s housing and comprise almost half of the demand for new mortgage commitments, for politicians, investors and the public at large, having an understanding of the typical profile of the Australian property investor is important, particularly with regard to where investors are most active and what contribution they are making to the overall national economy.”
In compiling this comprehensive analysis, Mr Lawless said, “This Report is not intended to support, or implicitly criticise any political party’s taxation policy or policy platforms, but rather provide unbiased, independent statistics and analysis to inform the current housing debate.”
As highlighted in the CoreLogic Profile of the Australian Residential Investor Report, at a national level investment is generally skewed towards the lower valuation brackets; 53.4% of investment-owned dwellings have a current estimated market value of less than $500,000, compared with 46.9% of owner occupied dwellings. Additionally, each capital city shows the large majority of
investor -owned dwellings have an estimated market value that is lower than the capital city median value.
Across the dwelling types, investors show the highest concentrations within the medium to high density sector, with almost half (48%) of Australia’s unit stock owned by investors, compared with only 17% investment ownership of detached housing.
Geographically, investment concentrations tend to be highest within the capital cities, particularly Melbourne, however large concentrations of investor owned dwellings can also be found in mining regions and coastal markets associated with tourism and lifestyle factors.
Mr Lawless said, “While investors have generally derived strong capital gains from their properties over recent years, growth in rental income has been comparatively soft. Investment is currently ensuring that there is ample rental accommodation and subsequently easing rental price pressures.”
“Across the combined capital cities, weekly rents were 0.2% lower over the 12 months to April 2016 whilst gross rental yields have been on a downwards trajectory since mid-2013, when growth in dwelling values started to outpace growth in rental rates.”
“Currently, it’s lower mortgage rates that are offsetting the burden of low rental yields, however, the spread between the average standard variable mortgage rate and gross rental yields has been pushing slightly higher since September last year.”
According to ATO data included in the CoreLogic Profile of the Australian Residential Property Investor Report, residential investors claimed $3.719 billion in losses associated with their rental properties over the 2013/2014 financial year. Importantly, net rental losses have reduced from $5.654 billion (-34.2%) from 2012/13 and are down from $9.065 billion (-59.0%) after peaking in 2007/08.
Mr Lawless said, “As interest costs reduce, the ability to claim a rental loss reduces because the interest deduction is overwhelmingly the single largest deduction available. With interest rates moving even lower since June 2014, we would expect net rental losses will reduce even further over the coming years, but are likely to increase when interest rates rise.”
“When mortgage rates do eventually start to rise, investors will be facing a scenario of higher holding costs. This is likely to result in a renewed focus on recovering these higher costs via rental increases. However, if residential property investors are unable to implement higher rents, we can expect to see an increase in net rental losses.”
Points of Interest (further elaborated upon in today’s Investor Report www.corelogic.com.au/investorprofile or in attached):
CoreLogic estimates there are 2.6 million investor owned dwellings across Australia worth approximately $1.37 trillion;
2.03 million individuals, or 15.7% of all taxpayers invest in residential housing. In contrast, data from the Australian Securities Exchange (ASX) identified that approximately 6.48 million people, or 36% of the adult Australian population, own shares.
Investor owned dwellings comprise 26.9% of all housing stock by number, or 23.8% based on the value of all housing stock, which shows that investment in the housing market is generally across lower valuation segments compared with owner occupied homes;
Current taxation statistics show there are 2.03 million individual investors; and on average each investor owns 1.28 investment properties;
Investment is heavily concentrated within the unit sector, where investor owners comprise almost half (48%) of all attached housing;
The largest investor concentration is within inner city unit markets – investors represent almost 60% of unit stock in Victoria and South Australia and approximately 50% in New South Wales and Queensland;
Investor concentrations are heaviest around captured rental markets such as office precincts, universities and hospitals;
Outside of the capital cities, investment concentrations are substantial within mining and resources related areas and in tourism-centric markets such as the Gold Coast and Far North Queensland.
While residential property investors cost the Federal Government $3.719 billion in foregone income tax via negative gearing, the Federal Government has benefitted from the capital gains tax associated with $51.2 billion in resale profits made by investors over the 2015 calendar year, as well as contributions from investors to State and Local Government taxes which totaled $45.203 billion over the 2014/15 financial year.
While the long-term average of ABS housing finance commitments data shows that the large majority of investment dollars flow into established housing, focusing purely on housing finance commitments for new housing stock (includes construction of dwellings and purchase of new), the March 2016 data from the ABS shows investors comprised approximately 40% of market demand across this sector.
Over the long-term investors have accounted for 23.9% of the value of all housing finance commitments for new housing stock, with investment activity in this sector accelerating over the past four years.
Mr Lawless noted, “Given the significance of this asset class to Australians wealth, and to continued economic prosperity and financial system stability, it is important that policymakers and commentators have access to the most comprehensive and independent statistics and analysis to inform the current housing debate, and ensure any potential changes are considered in the context of this broader context.”
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Disclaimer:: In compiling this publication, RP Data Pty Ltd trading as CoreLogic has relied upon information supplied by a number of external sources. CoreLogic does not warrant its accuracy or completeness and to the full extent allowed by law excludes liability in contract, tort or otherwise, for any loss or damage sustained by subscribers, or by any other person or body corporate arising from or in connection with the supply or use of the whole or any part of the information in this publication through any cause whatsoever and limits any liability it may have to the amount paid to CoreLogic for the supply of such information.
CoreLogic Australia is a wholly owned subsidiary of CoreLogic (NYSE: CLGX), which is the largest property data and analytics company in the world. CoreLogic provides property information, analytics and services across Australia, New Zealand and Asia, and recently expanded its service offering through the purchase of project activity and building cost information provider Cordell. With Australia’s most comprehensive property databases, the company’s combined data offering is derived from public, contributory and proprietary sources and includes over 500 million decision points spanning over three decades of collection, providing detailed coverage of property and other encumbrances such as tenancy, location, hazard risk and related performance information.
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