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Myth vs. Facts: The Average Aussie Investor

Myth vs. Facts: The Average Aussie Investor
October 14, 2019 Simon Pressley

It’s hard to argue against the cold hard truth of facts.

I’ve built my reputation on the foundation that correctly interpreted numbers don’t lie.

Remove the emotion, lay bare the results and you’ll get a clear picture of how things really are.

It’s with this at front of mind that I’d like to offer up a new set of numbers to disprove some long-held, but ultimately untrue, societal attitudes.

These figures show plenty of people – including our nation’s leaders – are basing their opinions of property investment on some dead wrong assumptions around exactly who the average Aussie real estate investor really is.

Nonsense Assumption

For too long, property investors have been categorised as a group of disparately wealthy individuals who are hording far more than their fair share of real estate.

They’re, apparently, motivated to grow outrageously wealthy through acquiring multiple properties at the expense of lower-income and younger homebuyers.

This sort of thinking has pervaded and directly influenced public policy for years, but I’ve analysed ATO statistics from 2017, and these clearly demonstrate the typical Aussie investor couldn’t be further removed from these unjustified characterisations.

Myth vs. Fact

Myth – “Most investors own a huge number of properties.”

Fact: Our analysis showed that of the 2,156,319 investors across Australia, 90.2 per cent of them – around 1.95 million – held just one or two properties.

And of the remaining 212,000 investors, just 20,000 held six or more properties – less than one per cent of Australians fit in to this category.

So, the next time a politician suggests that by imposing additional taxation on the investor community they are going after so-called ‘fat-cats’ holding huge portfolios of multiple assets, take a moment to remember these policies are, in fact, unfairly hurting ‘mum-and-dad’ individuals holding just an asset or two.

 

Myth – “Property investment is a game played by high-income earners.”

Fact: The numbers again prove this to be an unfounded generalisation.

Keeping in mind the gross average wage in Australia is around $82,000 per year, we took a look at exactly how many investors were earning around average or below-average taxable incomes.

Related article: Three properties for a combined $500 pm

Of the approximately 1.5 million investors (or around 71 per cent of all investors) that held just one investment property, 43 per cent had an annual income below $50,000 per year.

If you look at the results for those earning an income below $100,000, you’ll find 77 per cent of one-property investors fall into this category.

Let’s extrapolate that data out.

Of investors who hold a two-property portfolio, 39 per cent earn less than $50,000 per year. Broaden the parameter further and you’ll discover 73 per cent of the total earn less than $100,000 per year.

OK, so how about of the total number of investors in Australia in 2017? Well, 45 per cent were earning under $50,000 per year. Move the goal posts one spot and you’ll see 78 per cent earn under $100,000 per year.

Hmm.

Property investment is hardly the realm of the mega-income earner according to these factual results!

 

Myth- “Property investors do it for the negative gearing benefits”

Fact: 41 per cent of Australian residential properties which receive rental income are either cash flow neutral or produce a profit.

The average annual cash profit from these properties is $6,937. That means that the owners of this large sum of investment properties have to pay additional tax.

Of the 59 per cent loss-making properties, the average annual net loss is $6,582 per property.

Myth– “Property investors are predominantly retirees and baby-boomers.”

Fact: The numbers show that there‘s a fairly even split between those over 50 and those under that age.

While just six per cent of all investors are under 30, 21 per cent are 30 to 39 years of age, and 25 per cent are 40 to 49.

Related article: Rentvesting frequently asked questions

So, the analysis revealed around 51 per cent of investors are under 50, while 49 per cent are above the half century.

Most pundits might be surprised to learn that there are plenty of sub-50 active investors looking to build for future retirement. 

The Average Aussie Investor

By our reckoning, the average Aussie investor will probably own just one property, have an income definitely below $100,000 per year (and possibly less than $50,000) and could be decades away from retirement.

Of most importance, the majority of investors are people who elect to not live in the moment and spend everything that they earn, instead choosing to make some financial sacrifices during their 40-ish year in the workforce to improve their position for those post-work years.

I think the world would be a better place if less people were dependent upon the public purse.

From the time that we start learning our times-tables, society should teach financial literacy, including providing people with basic tools for accumulating funds for important future needs

By more people being responsible with what they earn and aspiring towards eventually becoming financially independent – which, by the way, is a distinctly different thing to being rich – more taxpayer funds will be available for essential infrastructure like hospitals and public transport and more funding for teachers.

Instead, only 18 per cent of Australians whom are already over the age of 65 years are financially independent.

The biggest line item in the federal budget is for ‘aged pensions’ – already a whopping $50 billion and growing by circa $2 billion each year.

Property investors also provide the flow-on benefit of helping provide housing options to a large swath of the population who, for a variety of reasons, choose to live in rented accommodation.

Only 1.2 per cent of Australia’s housing stock is funded by governments – our taxes can only be spread so far.

Mum-and-dad investors have supplied almost all of the 3,167,623 residential rental properties in Australia – about one third of Australia’s total dwelling stock.

Remind me again why this (property investor) demographic is often the target of government policies and societal backlash.

Propertyology is Australia’s premier property market analyst and award-winning buyer’s agency. Every capital city, every non-capital city, we analyse fundamentals in every market, every day. We use this valuable research to help everyday Aussies to invest in strategically-chosen locations (literally) all over Australia. Like to know more? Contact us here.

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